Question

A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at $24,000, the transaction will generate:

a. $6,000 worth of buyer surplus and unknown amount of seller surplus
b. $4,000 worth of seller surplus and unknown amount of buyer surplus
c. $6,000 worth of buyer surplus and $4,000 of seller surplus
d. No surplus

Answer 1

C) $6,000 worth of buyer surplus and $4,000 of seller surplus

Step-by-step explanation:

Buyer surplus is the result of the difference between the price that a buyer is willing to pay for a good, and the good's actual price: $30,000 - $24,000 = $6,000

Seller surplus is the result of the difference between the good's actual price, and the price that a seller is willing to charge for the good: $24,000 - $20,000 = $4,000