Chapter 1. Consumer and Producer Surplus

1.1

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4
16

Question

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2
No, that's not it. The area between the demand curve and the price is found by calculating the area of the triangle whose height is 3 (9-6) and whose width is 2 (2-0). The formula for the area of a triangle is 1/2 (base x height) so the answer is 1/2 (2 x $3) = $3.
Great job!

Question

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2
Great job!
The area between the demand curve and the price is found by calculating the area of the triangle whose height is 6 (9-3) and whose width is 4 (4-0). The formula for the area of a triangle is 1/2 (base x height) so the answer is 1/2 (4 x $6) = $12.

Question

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2
Correct!
Incorrect. Since the price decrease causes two NEW cups of Tea to be consumed, only area C represents the consumer surplus attributed to NEW purchases.

Question

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2
Correct.
Incorrect. Since the price decrease causes the original purchasers to enjoy a new lower price on those cups of Tea that were already being purchased, area B represents the consumer surplus attributed to ORIGINAL purchases.

Question

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2
Correct!
Incorrect. Since the price increases causes producers to be willing to sell 1 NEW cup of tea (from 2 to 3), only area F represents the producer surplus attributed to NEW sales.

Question

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2
Correct.
Incorrect. Since the price increase causes the original sellers to enjoy a new higher price on the two cups of Tea that were already being purchased, area E represents the increase in producer surplus on the tea already being sold.