Chapter 7 Application See D2L week 4 – Practice

Graph 1

Equilibrium
P: $1,300
Q: 100 computers

Total Revenue
TR= P x Q = $1,300 x 100 = $130,000

Consumer Surplus
WTP: $2,000
P: $1,300
Cs = WTP - P = $2,000 - $1,300
Cs= $700 Gain from exchange

Total Consumer Surplus

TCs = 1/2 x Q x (WTP - P) = 1/2 x 100 x $700
TCs = $35,000 Gain from exchange

Producer Surplus
WTS: $500 (OC)
P: $1,300
Ps = (P received - C) or (P received - WTS)
Ps = $800 Gain from exchange

Total Producer Surplus

TPs = 1/2 x Q x (p - WTS)
PPs = 1/2 x 100 x $800
TPs = $40,000 Gain from exchange

Market Efficiency
TCS + TPS = $35,000 + $40,000 = $75,000
The total gain from the free market is
maximize

Chapter 1
Rational People decision making is based on the Marginal
Benefits (D) vs Marginal Costs (S).

Chapter 13
MB > MC: Purchase
MB = MC: Equilibrium and S = D
MB < MC:
MB is the willingness to pay for that extra units will provide
and on how many units that already possess. MB is the next
unit being consumed or acquired.

MB = D = Downward slope demonstrates the diminishing

return when people acquire an additional good.
Graph 2

Equilibrium
P: $1,000
Q: 150 computers

Calculate Total Revenue?

Calculate Consumer Surplus?

Calculate Total Consumer Surplus?

Calculate Producer Surplus?

Calculate Total Producer Surplus?

Calculate Total Market Surplus or Efficiency?