Answered: Calculate the consumer surplus, and…

Business

Economics

Calculate the consumer surplus, and producer surplus given: P = 120 - .25q and MC + 2q =5. Illustrate your response.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter3: Market Demand And Supply

Section3.A: Consumer Surplus, Proudcer Suplus, And Market Efficency

Problem 6SQ

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Question

Calculate the consumer surplus, and producer surplus given:
P = 120 - .25q and MC + 2q =5. Illustrate your response.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Expert Solution