Question

Below table represents buyers’ willingness to pay for a roasted chicken and consider that there is only one supplier whose cost to produce 1 unit of the product is $2 and current price in the market is $6. Calculate total surplus in this market. (1 point)

------------------------------ Abraham----- Smith----Chuck
Willingness to pay -------- $10 -------- $7----------$5

Answer 1

$13

Step-by-step explanation:

total consumer surplus = ($10 - $6) + ($7 - $6) = $4 + $1 = $5

total supplier surplus = ($6 - $2) x 2 units = $4 x 2 = $8

total surplus in the market = consumer surplus + supplier surplus = $5 + $8 = $13

Since the price is higher than Chuck's willingness to pay, no transaction will occur resulting in 0 surplus.