Question

Consumer and Producer Surplus Work It Out: Question 1 of 3 The accompanying curves for taxi rides in New York City Place point E1 at the market equilibrium and calculate each of the following (round to the nearest million) Market for Taxi Rides in NYC 5.0 iagram shows the demand and supply 4.5 4.0 3.5 3.0 2.5 2.0 Consumer surplus million Producer surplus: $ million 0.5 0.0 Total surplus: $ million 0 120 240 360 480 600 720 840 960 1,080 1,200 Quantity of tax rides (millions of miles)

Answer 1

Equilibrium price = $2.5 per mile

Equilibrium quantity = 600 million miles

Consumer surplus = (0.5)(5-2.5)(600) = (0.5)(2.5)(600)= $750 million.

Producer surplus = (0.5)(2.5-0.5)(600)= (0.5)(2)(600)= $600 million

Total surplus = CS + PS = $(750+600) million = $1350 million.