Assume the market in the graph shown with demand D and supply S₁ is in equilibrium at a quantity of 5 units.Total surplus is: A) $5. B) $15. C) $12.50. D) $60.

Question

Quizplus · Accepted Answer

To calculate total surplus, we need to find the area between the supply and demand curves up to the equilibrium quantity.

Total consumer surplus = area above the equilibrium quantity and below the demand curve = (1/2) x (5-0) x (10-5) = $12.50

Total producer surplus = area below the equilibrium quantity and above the supply curve = (1/2) x (5-0) x (5-0) = $12.50

Total surplus = total consumer surplus + total producer surplus = $12.50 + $12.50 = $25

Therefore, the correct answer is C) $12.50.

Assume the Market in the Graph Shown with Demand D