ECON 101 -014 ZeCheng Zhan | 9 Homework: MyLab - Chapter 4 Score: 1.33 of 2 pts

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ECON 101 -014 ZeCheng Zhan | 9 Homework: MyLab - Chapter 4 Score: 1.33 of 2 pts 10 of 23 (10 complete) HW Score: 30.67% Concept. Economic Surplus 1 Consider the market for eggs illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of 5 cents and a quantity of 50 (thousand). If the price were 7 cents instead of 5 cents, then consumer surplus would O A. increase by area C O B. decrease by areas B and F O C. increase by areas C and F O D. decrease by area B. 71 E. decrease by areas B and E Click to select your answer and then click Check Answer 4 parts remaining Clear All Final Che

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The correct answer is (E) Decrease by areas B and E.

Consumer Surplus is the benefit consumer recieves by purchasing at a price lesser than what they are ready to pay.

In order to calculate Consumer Surplus we have to calculate are Below Demand Curve and above Price.

At equilibrium Price = 5 the Consumer Surplus = Area below D curve and above Price line P = 5. Hence Consumer Surplus = A + B + E.

If Price = 5 then Consumer Surplus = Area below D curve and above Price line P = 7. Hence Consumer Surplus = A.

Hence Change in Consumer Surplus = Consumer Surplus If Price = 7 - Consumer Surplus If Price = 5

Hence Change in Consumer Surplus = A - A - B - E = - B - E

Hence Consumer surplus decreases by area B + E

Hence The correct answer is (E) Decrease by areas B and E

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