Question

29. You and 99 other consumers purchased 1 box of Kellogg's newest cereal, the other day, at Walmart. The cereal was on sale for $2.86 per box. The market was willing to pay $3 each. And, Walmart's cost was $1.50 per box. Calculate: 1) the total consumer surplus; 2) the total producer surplus; 3) the total surplus; 4) the total value to buyers minus the total amount paid by buyers; 5) total amount received by sellers minus the total cost to sellers; 6) total amount paid by buyers compared to the total amount received by sellers; 7) total value to buyers minus the total cost to sellers. Comment on all in 2 or more paragraphs.

Answer 1

A, consumer surplus= market willing to pay - sales price

= 3 - 2.86

= 0.14 per box

Total consumer surplus = 0.14 * 100 = $14

Producers surplus = market price - cost of production

= 2.86 - 1.50

=1.36 * 100

Total producer surplus =$ 136

Total surplus = consumer surplus + producer surplus

= 14 + 136

= $150

the total value to buyers minus the total amount paid by the buyers = total surplus - selling price

= 150 - (100* 2.86)

= 150 - 286

= $ 136

Total amount received by the sellers minus total cost to sellers = 286 - (1.5 * 100)

= 286 - 150

= $136.

Total amount paid by the buyers compared to the total amount received by the sellers

= (2.86 * 100)-(2.86*100)

= Nil

Total value to buyers minus total cost to sellers

= Total surplus - total cost

= 150 - (1.5*100)

= 150 - 150

= Nil