Question

Suppose there are three identical blenders available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many blenders will be sold and what is the value of consumer surplus in this market? *

a. One blender will be sold and consumer surplus is $30.

b. One blender will be sold and consumer surplus is $5.

c. One blender will be sold and producer surplus is $5.

d. Three blenders will be sold and consumer surplus is $0.

e. None of these.

Answer 1

Answer

option e

P=$25

A consumer purchases a good if the price is below or equal to the willingness to pay

Q=2 units, two buyers have the willingness to pay higher or equal to the price.

Consumer surplus =sum of (maximum willingness to pay - price)

=30-25+25-25

=$5

it means two blenders will be sold and producer surplus is $5