https//newconnect.mheducation.com/flow/connect.h 0 t Look at the two tables belo
ID: 1151648 • Letter: H
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https//newconnect.mheducation.com/flow/connect.h 0 t Look at the two tables below. What is the total surplus if unit from Chad? If you match up pairs of buyers and selers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved? Bob buys a unit from Carlos? If Barb buys a unit from Courtney? M Bob buys a Person $5 Barb Chuck Brent 10 13 15 e a What is the total surplus if Bob buys a unit from Carlos? b. What is the total surplus if Barb buys a unit from Courtney c What is the total surplus if Bob buys a unit from Chad? d. I# you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?Explanation / Answer
Total surplus is the sum of consumer and producer surplus.
Mathematically,
Total surplus = Maximum willingness to pay - minimum acceptable price
a) If Bob buys a unit from Carlos then total surplus = Maximum willingness to pay of Bob - Minimum acceptable price by Carlos = 19 - 5 = $14
b) If Barb buys a unit from Courtney then total surplus = Maximum willingness to pay of Barb - Minimum acceptable price of Courtney = 16 - 7 = $9
c) If Bob buys a unit from Chad then total surplus = Maximum willingness to pay of Bob - Minimum acceptable price by Chad = 19 - 15 = $4.
d) if we match up pairs of buyers and sellers to maximize total surplus, the largest total surplus that can be achieved by choosing the pair with the largest gap between maximum willingness to pay and minimum acceptable price
So we find a pair where this difference is maximum, and can achieve the largest total surplus.
The total surplus is maximum or largest of the pair Bob and Carlos as the difference between them is the maximum =
19 - 5 = $14.
You can find all the pairs differences like (Bob, Carlos) (Bob, Chuck), (Barb, Chad) etc. And can compare it with $14 in all cases (Bob, Carlos) pair has the largest total surplus.
It is so because the maximum willingness to pay of Bob is the largest in all consumers and minimum acceptable price by Carlos is the smallest in all producers, so the largest total surplus is $ 14 of (Bob,Carlos) .
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