Suppose that towns collect resources from their surroundings. Then, through trade, they attempt to obtain other desirableitems. Mortarville, an urban town that specializes in brick and ore, wants wood to build roads so that it can expand andconnect to other major cities. Mortarville has a willingness to pay $50 for wood, since wood is hard for them to obtainMayflair also needs wood to build grain silos for their wheat harvests. Mayflair is willing to pay $45 for wood. Timber, theonly foresting company, sets the price of wood at $60.The change in total surplus that arises due to trades between Timber and the towns isJohn finds a set of wood in his garage which he is willing to sell for no less than $35. John chooses to sell the set to Mayflairfor $40 instead of to Mortarville for $45.As a result of John's transaction with Mayflairtotal surplus increased, but the market is inefficienttotal surplus decreased, and the market is inefficienttotal surplus increased, and the market is efficienttotal surplus decreased, but the market is efficient.

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Asked Sep 30, 2019
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Suppose that towns collect resources from their surroundings. Then, through trade, they attempt to obtain other desirable
items. Mortarville, an urban town that specializes in brick and ore, wants wood to build roads so that it can expand and
connect to other major cities. Mortarville has a willingness to pay $50 for wood, since wood is hard for them to obtain
Mayflair also needs wood to build grain silos for their wheat harvests. Mayflair is willing to pay $45 for wood. Timber, the
only foresting company, sets the price of wood at $60.
The change in total surplus that arises due to trades between Timber and the towns is
John finds a set of wood in his garage which he is willing to sell for no less than $35. John chooses to sell the set to Mayflair
for $40 instead of to Mortarville for $45.
As a result of John's transaction with Mayflair
total surplus increased, but the market is inefficient
total surplus decreased, and the market is inefficient
total surplus increased, and the market is efficient
total surplus decreased, but the market is efficient.
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Suppose that towns collect resources from their surroundings. Then, through trade, they attempt to obtain other desirable items. Mortarville, an urban town that specializes in brick and ore, wants wood to build roads so that it can expand and connect to other major cities. Mortarville has a willingness to pay $50 for wood, since wood is hard for them to obtain Mayflair also needs wood to build grain silos for their wheat harvests. Mayflair is willing to pay $45 for wood. Timber, the only foresting company, sets the price of wood at $60. The change in total surplus that arises due to trades between Timber and the towns is John finds a set of wood in his garage which he is willing to sell for no less than $35. John chooses to sell the set to Mayflair for $40 instead of to Mortarville for $45. As a result of John's transaction with Mayflair total surplus increased, but the market is inefficient total surplus decreased, and the market is inefficient total surplus increased, and the market is efficient total surplus decreased, but the market is efficient.

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Expert Answer

Step 1

From the trade between Timber and towns, the change in total surplus is zero.

Step 2

If the cost is $35, the total surplus...

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Total surplus Maximum willing price to sel -Minimum acceptable selling price =40-35 =5

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