Use the graph below to answer the following questions When production is 150 uni

Question

Use the graph below to answer the following questions When production is 150 units with a price of $3, consumer surplus in the market illustrated in the graph above equals area a. area b. area a + b. area a + d. When production is 150 units with a price of $3, producer surplus in this market equals area a + b. area c. area c + d. area a + c. If the quantity is restricted to 100 units, then the deadweight loss equals area c. area c +d. area a +b. area b + c. The total surplus when 150 units are produced the total surplus when 100 units are produced. is larger than the same as is less than cannot be compared to

Explanation / Answer

a) area a + b ( consumer surplus is defined as the area below the demand curve and above the price line )

b) area c + d ( producer surplus is defined as the area below the price line and above the supply curve )

c) area b + c ( deadweight loss is the surplus wasted due to unecessary regulations imposed on the market.note in this case area a is consumer surplus and d is producer surplus and hence area b + c is going nowhere.)

d) is larger than ( when market equilibrium is left to be determined by market forces only than efficiency is achieved and hence aggregate surplus is maximized.)

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