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Business Economics Principles of Macroeconomics, Student Value Edition (12th Edition)

Calculate and illustrate the consumer surplus and producer surplus on the graph.

Calculate and illustrate the consumer surplus and producer surplus on the graph.

Solution Summary: The author illustrates the consumer surplus and producer surplus on the graph. The equilibrium for market of DVDs is attained when price is 4 and quantity is 18 million.

Principles of Macroeconomics, Student Value Edition (12th Edition)

Principles of Macroeconomics, Student Value Edition (12th Edition)

12th Edition

ISBN: 9780134079530

Author: Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher: PEARSON

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Question

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.

Chapter 4, Problem 3.4P

Subpart (a)

To determine

Calculate and illustrate the consumer surplus and producer surplus on the graph.

Subpart (b)

To determine

To calculate the total consumer surplus, producer surplus and dead weight loss when there is underproduction and show them on the graph.

Subpart (c)

To determine

To calculate the total consumer surplus, producer surplus and dead weight loss when there is overproduction and show them on the graph.

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Chapter 4, Problem 3.3P

Chapter 5, Problem 1.1P

Chapter 4 Solutions

Principles of Macroeconomics, Student Value Edition (12th Edition)

Ch. 4 - Prob. 1.1P Ch. 4 - Prob. 1.2P Ch. 4 - Prob. 1.3P Ch. 4 - Prob. 1.4P Ch. 4 - Prob. 1.5P Ch. 4 - Prob. 1.6P Ch. 4 - Prob. 1.7P Ch. 4 - Prob. 1.8P Ch. 4 - Prob. 1.9P Ch. 4 - Prob. 1.10P

Ch. 4 - Prob. 1.11P Ch. 4 - Prob. 1.12P Ch. 4 - Prob. 2.1P Ch. 4 - Prob. 2.2P Ch. 4 - Prob. 3.1P Ch. 4 - Prob. 3.2P Ch. 4 - Prob. 3.3P Ch. 4 - Prob. 3.4P

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Similar questions

The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: a. The cost of producing Zlurp is 150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each Whovillian consume? What is each persons consumer surplus? b. Producing Zlurp creates pollution. Each bottle has an external cost of 1. Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)? c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindys welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindys decision affect total surplus in Whoville? d. MayorCrinch imposes a 1 tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person. e. Based on your calculations, would you support the mayors policy? Why or why not?

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