Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 5 - Market Failures: Public Goods and Externalities - Problems - Page 113: 4a

Answer

Total surplus: 800 Consumer surplus: 400

Work Step by Step

Total surplus is triangle ABC and its area can be given by 0.5 $\times$ 20 $\times$ (85-5) = 800 Consumer surplus in this case would be the top half of the total surplus, as the price is at equilibrium, and the difference between the maximum price that consumers are willing to pay and the price they actually pay is the area bounded by the demand curve and a horizontal line drawn from the price axis to the equilibrium price. Therefore, 800 $\div$ 2 = 400
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