Answered: 3. Consumer surplus and producer…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Consumer surplus and producer surplus from market exchange

Consider the Bolivian market for lemons.

The following graph shows the domestic demand and domestic supply curves for lemons in Bolivia. Suppose Bolivia's government currently does not allow the international trade in lemons.

Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in Bolivia in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium.

Note: Select and drag a fill area point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region.

Based on the previous graph, total surplus in the absence of international trade is $____ million.

Domestic Demand
Domestic Supply
1430
1340
No Trade Equilibrium
1250
1160
Consumer Surplus
1070
980
890
Producer Surplus
800
710
620
530
0 20
QUANTITY (Thousands of tons of lemons)
40
60
80
100
120
140
160
180
200
PRICE (Dollars per ton)

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