**Text:**a) In an autarkic (closed) economy, the national equilibrium price for good A is $1,000 per unit and total consumption amounted to 1,000 units. If the maximum price consumers are willing to pay for this good is $1,400 per unit at 0 units of output, calculate the consumer surplus. Suppose at a minimum price of $400 per unit, the producer's output is 0 units but will produce 1,000 units at the equilibrium price of $1,000, calculate the producer surplus.b) Who is better off, the consumer or the producer and why?**Explanation of Concepts:**- **Consumer Surplus:** It's the difference between what consumers are willing to pay and what they actually pay. It is represented by the area under the demand curve and above the equilibrium price level up to the quantity traded. - **Producer Surplus:** This is the difference between the amount producers receive and the minimum amount they are willing to accept. It is depicted as the area above the supply curve and below the equilibrium price level up to the quantity sold.To calculate the **consumer surplus**:- Maximum price willing to pay = $1,400- Equilibrium price = $1,000- Quantity = 1,000 unitsConsumer Surplus = 0.5 × (Maximum price − Equilibrium price) × Quantity= 0.5 × ($1,400 − $1,000) × 1,000= $200,000To calculate the **producer surplus**:- Equilibrium price = $1,000- Minimum price willing to accept = $400- Quantity = 1,000 unitsProducer Surplus = 0.5 × (Equilibrium price − Minimum price) × Quantity= 0.5 × ($1,000 − $400) × 1,000= $300,000**Analysis:**b) To determine who is better off, compare the consumer surplus and producer surplus. In this scenario, the producer surplus ($300,000) is greater than the consumer surplus ($200,000), making producers relatively better off in this market context.There are no graphs or diagrams included with this image.

Given, Equilibrium price = $1,000 per unit Equilibrium quantity = 1000 units Maximum willingness to…

a) In an autarkic (closed) economy, the national equilibrium price for good A is $1,000 per unit and total consumption amounted to 1000 units. If the maximum price consumers are willing to pay for this good is $1,400 per unit at 0 units of output, calculate the consumer surplus. Suppose at a minimum price of $400 per unit, the producer's output is 0 units but will produce 1000 units at the equilibrium price of $1,000, calculate the producer surplus. b) Who is better off, the consumer or the producer and why?

a) In an autarkic (closed) economy, the national equilibrium price for good A is $1,000 per unit and total consumption amounted to 1000 units. If the maximum price consumers are willing to pay for this good is $1,400 per unit at 0 units of output, calculate the consumer surplus. Suppose at a minimum price of $400 per unit, the producer's output is 0 units but will produce 1000 units at the equilibrium price of $1,000, calculate the producer surplus. b) Who is better off, the consumer or the producer and why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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