Figure 7-20

-Refer to Figure 7-20.At equilibrium,total surplus is
A) $36.
B) $72.
C) $108.
D) $144.

Question

Figure 7-20
 
-Refer to Figure 7-20.At equilibrium,total surplus is
A) $36. 
B) $72. 
C) $108. 
D) $144.

Quizplus · Accepted Answer

At equilibrium, the quantity produced is Q = 9 and the price is P = $12. The consumer surplus is the area above the price and below the demand curve, which is (1/2)(9)(18-12) = $27. The producer surplus is the area below the price and above the supply curve, which is (1/2)(9)(12-6) = $27. Total surplus is the sum of consumer and producer surplus, which is $27 + $27 = $54. However, there is also deadweight loss (the triangle between the supply and demand curves and the quantity produced), which is (1/2)(9)(12-6) = $27. Therefore, total surplus at equilibrium is $54 - $27 (deadweight loss) = $27. The total economic value is the sum of consumer surplus, producer surplus, and deadweight loss, which is $27 + $27 + $54 = $108.

Figure 7-20 -Refer to Figure 7-20.At Equilibrium,total Surplus Is