-The above figure shows the market for steel ingots.What is the total surplus under social optimum?

Question

Quizplus · Accepted Answer

The total surplus under social optimum is the sum of consumer surplus and producer surplus. The consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. The producer surplus is the difference between the price producers receive for a good and the price they are willing to accept. In this case, the consumer surplus is the area below the demand curve and above the equilibrium price, which is $2500. The producer surplus is the area above the supply curve and below the equilibrium price, which is $4000. Therefore, the total surplus under social optimum is $2500 + $4000 = $6500.

-The Above Figure Shows the Market for Steel Ingots