Question:
Demand: $Q_D = 40 – 2P$, Supply: $Q_S = -40 + 8P$. The total surplus at the equilibrium is
(1) 36.
(2) 144.
(3) 180.
(4) 192.
(5) 360.
Correct Answer:
(3)
Answer Explanation:
Set $Q_D = Q_S$: $40 – 2P = -40 + 8P rightarrow 10P = 80 rightarrow P = 8$. Equilibrium Q = $40 – 2(8) = 24$. Demand intercept (Q=0): P=20. Supply intercept: P=5. Consumer Surplus = $0.5 times 24 times (20 – 8) = 144$. Producer Surplus = $0.5 times 24 times (8 – 5) = 36$. Total Surplus = 144 + 36 = 180.
Topic: Consumer Surplus Year: 2022
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