Figures 5.4a and 5.4b . Q 1 5 20 bags. Q 2 5 15 bags. Q 3 5 27 bags. The market

Question

Figures 5.4a and 5.4b . Q 1 5 20 bags. Q 2 5 15 bags. Q 3 5 27
bags. The market equilibrium price is $45 per bag. The
price at a is $85 per bag. The price at c is $5 per bag. The
price at f is $59 per bag. The price at g is $31 per bag. Apply
the formula for the area of a triangle (Area 5 ½ 3 Base 3
Height) to answer the following questions. LO2

Questions below:

a. What is the dollar value of the total surplus (producer surplus
plus consumer surplus) when the allocatively efficient
output level is being produced? How large is the
dollar value of the consumer surplus at that output
level?

Explanation / Answer

In this case, we use the formula to calculate PS and CS and TS is the sum of these PS=1/2(85-45)(27-20)=140 CS=1/2(45-5)(20-15)=100 TS=100+140=240

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