Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![The image depicts a standard supply and demand graph, illustrating the interaction of price (P) and quantity (Q) in a market.
**Axes:**
- The vertical axis represents price (P) in dollars, ranging from 13 to 20.
- The horizontal axis represents quantity (Q) in units, with a specific value marked at 50.
**Curves:**
- The upward-sloping line labeled "S" denotes the supply curve.
- The downward-sloping line labeled "D" denotes the demand curve.
**Equilibrium Point:**
- The intersection of the supply and demand curves occurs at a price of $16 and a quantity of 50 units. This is the equilibrium point where market supply equals market demand.
**Dotted Lines:**
- A horizontal dashed line extends from the price level of $16 to the equilibrium point.
- A vertical dashed line extends from the quantity level of 50 to the equilibrium point.
**Calculation of Producer Surplus:**
Producer surplus is the area above the supply curve and below the equilibrium price, up to the equilibrium quantity. This is represented by the triangle beneath the equilibrium price ($16) down to the supply curve, from 0 to the equilibrium quantity (50 units).
**Question:**
"Producer surplus in this market is ____."
**Options:**
- $75
- $175
- $200
- Not enough information
To calculate producer surplus, use the formula for the area of a triangle:
\[ \text{Producer surplus} = \frac{1}{2} \times (\text{Base} \times \text{Height}) \]
- **Base** = Equilibrium quantity (50 units)
- **Height** = Difference between equilibrium price ($16) and the lowest price on the supply curve ($13)
Calculate the surplus accordingly.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd20ccb4f-d2ff-4047-a742-194d73bab825%2F78b34826-5fb0-4ba2-818f-564665b69adc%2F3kiyy_processed.png&w=3840&q=75)
Transcribed Image Text:The image depicts a standard supply and demand graph, illustrating the interaction of price (P) and quantity (Q) in a market.
**Axes:**
- The vertical axis represents price (P) in dollars, ranging from 13 to 20.
- The horizontal axis represents quantity (Q) in units, with a specific value marked at 50.
**Curves:**
- The upward-sloping line labeled "S" denotes the supply curve.
- The downward-sloping line labeled "D" denotes the demand curve.
**Equilibrium Point:**
- The intersection of the supply and demand curves occurs at a price of $16 and a quantity of 50 units. This is the equilibrium point where market supply equals market demand.
**Dotted Lines:**
- A horizontal dashed line extends from the price level of $16 to the equilibrium point.
- A vertical dashed line extends from the quantity level of 50 to the equilibrium point.
**Calculation of Producer Surplus:**
Producer surplus is the area above the supply curve and below the equilibrium price, up to the equilibrium quantity. This is represented by the triangle beneath the equilibrium price ($16) down to the supply curve, from 0 to the equilibrium quantity (50 units).
**Question:**
"Producer surplus in this market is ____."
**Options:**
- $75
- $175
- $200
- Not enough information
To calculate producer surplus, use the formula for the area of a triangle:
\[ \text{Producer surplus} = \frac{1}{2} \times (\text{Base} \times \text{Height}) \]
- **Base** = Equilibrium quantity (50 units)
- **Height** = Difference between equilibrium price ($16) and the lowest price on the supply curve ($13)
Calculate the surplus accordingly.

Transcribed Image Text:The image features a standard supply and demand graph. The vertical axis represents the price in dollars (P), ranging from 0 to 20. The horizontal axis indicates the quantity in units (Q). The supply curve (S) slopes upward, while the demand curve (D) slopes downward. The two curves intersect at a price of $16 and a quantity of 50 units.
There are lines indicating:
- A horizontal line from the price of $16 extending to meet the demand curve.
- A vertical line descending from this intersection point to the quantity axis at 50 units.
- Another horizontal line from the price of $13 indicating a point on the demand curve.
An interactive question is provided below the graph:
"Consider the following market. Consumer surplus in this market is _____."
The answer options are:
- $75
- $100
- $175
- Not enough information
The option "$75" is selected.
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