Question

24. David is willing to pay $8.51 for his fourth cappuccino (market price is $5.74) and the lowest price the store is willing to accept is $1.37. The economic surplus on the fourth cappuccino is a. $7.14 b. $14.28 c. $2.77 d. $5.54 e. $4.37

Answer 1

Ans.24- (A)

Economic surplus = consumer surplus + producer surplus = (8.51-5.74) + (5.74-1.37) = 2.77+ 4.37 = 7.14

Ans.25- (D)

Consumer surplus = 66-47 = 19

Producer surplus = 47-28 = 19

So, total surplus= 38.

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