The diagram below shows supply,demand,and quantity exchanged of Monday matinee movie tickets.Assume it is a perfectly competitive market. FIGURE 12-4
-Refer to Figure 12-4.Suppose a disequilibrium price of $7.50 per movie ticket is imposed on this market.The total economic surplus is now ________,which is ________ than the total economic surplus generated at the allocatively efficient level of output.
A)$125; $250 less
B)$125; $125 less
C)$187.50; $62.50 less
D)$62.50; $125 less
E)$187.50; $187.50 less

Question

The diagram below shows supply,demand,and quantity exchanged of Monday matinee movie tickets.Assume it is a perfectly competitive market.  FIGURE 12-4
-Refer to Figure 12-4.Suppose a disequilibrium price of $7.50 per movie ticket is imposed on this market.The total economic surplus is now ________,which is ________ than the total economic surplus generated at the allocatively efficient level of output.
A)$125; $250 less 
B)$125; $125 less 
C)$187.50; $62.50 less 
D)$62.50; $125 less 
E)$187.50; $187.50 less

Quizplus · Accepted Answer

At a disequilibrium price of $7.50, the quantity exchanged is 250 movie tickets (where the demand and supply curves intersect at a price of $7.50).

To calculate the total economic surplus, we need to find the area below the demand curve and above the price line (consumer surplus) and the area below the price line and above the supply curve (producer surplus).

Consumer surplus = 0.5 x ($10 - $7.50) x 250 = $312.50

Producer surplus = 0.5 x ($7.50 - $5) x 250 = $312.50

Total economic surplus = $312.50 + $312.50 = $625

This is $62.50 less than the total economic surplus at the allocatively efficient level of output ($187.50 + $437.50 = $625).

Therefore, the best choice is C.

The Diagram Below Shows Supply,demand,and Quantity Exchanged of Monday Matinee