Question

Each firm can produce at most one car. Suppose the market for electric cars is competitive. Why is the equilibrium price in this market ​$5050​,000? A. At this​ price, three consumers are willing to buy an electric car and three firms are willing to sell an electric car. B. At this​ price, the quantity demanded​ (three cars) equals the quantity supplied​ (three cars). C. At ​$5050​,000, three consumers have reservation values equal to or above ​$5050​,000 and three firms have reservation values equal to or below ​$5050​,000. D. All of the above.

Answer 1

Consumer surplus = (60000 - 40000)+ (90000 - 40000)+(40000 - 40000) = $70000

Producer surplus = (40000 - 20000)+(40000 - 30000)+ (40000 - 40000) = $30000

Social surplus = Consumer surplus +Producer Surplus= 70000 + 30000 = $100000

Consumer surplus = (Willingness to pay – Price)

Producer surplus = ( Price –Cost)