Log in
Economics
1
answer
0
watching
848
views

The figure to the right illustrates the market for a breast​ cancer-fighting drug, without which breast cancer patients cannot survive. What is the consumer surplus

LOADING...

in this market?

Consumer surplus is equal to

A.

price times quantity.

B.

​one-half of price times quantity.

C.

infinity.

D.

zero.

E.

None of the above.

How does it differ from the consumer surplus in the markets you have studied up to this point? Unlike in most other examples, in this case,

A.

the highest price a consumer is willing to pay is infinite.

B.

consumer surplus is equal to producer surplus.

C.

the highest price a consumer is willing to pay is greater than the price the consumer actually pays.

D.

consumer surplus is positive.

E.

the highest price a consumer is willing to pay is equal to the price the consumer actually pays.

00QuantityPrice

DemandDemand

SupplySupply

Upper PP

Upper Q

Watch
1
answer
0
watching
848
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Chika Ilonah
Chika IlonahLv10
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

18 Farmer Jones' marginal cost of producing tomatoes is $5 per bushel. A consumer is willing to pay at most $9 for the bushel. The market price of a bushel is $6 and Farmer Jones sells his bushel to that consumer for $6. On this bushel, Farmer Jones will eam a producer surplus equal to the consumer will gain a consumer surplus of A. $3: $0 B. $1; $0 C. $0; $9 D. $6; $9 E. $1; $3

There are four buyers (Debu, Sumon, Aslam & Rakib) in the market. All of them want to buy a pizza. Debu is willing to pay 800/- taka for one pizza, Sumon is willing to pay 600/- taka for one pizza, Aslam is willing to pay 400/- taka for one pizza, and Rakib is willing to pay 200/- taka for one pizza. On the other hand, there are four pizza sellers in the market (Anup, Roni, Himel & Badal). Anup’s cost of producing one pizza is 200/- taka, Roni’s cost of producing one pizza is 400/- taka, Himel’s cost of producing one pizza is 600/- taka, and Badal’s cost of producing one pizza is 800/- taka. Based on all of this information, answer the following questions

Q1 Derive the demand schedule for pizza.

Q2 If the market price of one pizza is 450/- taka, what will be the market quantity demanded pizzas, and what will be the total consumer surplus?

Q3 If the market price of one pizza is 350/- taka, what will be the market quantity demanded pizzas, and what will be the total consumer surplus?

Q4 Derive the supply schedule for pizza.

Q5 If the market price of one pizza is 500/- taka, what will be the market quantity supplied for pizzas, and what will be the total producer surplus?

Q6 If the market price of one pizza is 900/- taka, what will be the market quantity supplied for pizzas, and what will be the total producer surplus?

Q7 Now, considering the demand and supply side of this pizza market, calculate the market quantity demanded and quantity supplied at 100/-, 300/- and 500/- taka. Which of these prices brings supply and demand into equilibrium?

Q8 What are the entire consumer surplus & producer surplus, and total surplus in this equilibrium?

Suppose that the U.S. Department of Agriculture (USDA) administers the price floor for cheese, set at $0.17 per pound of cheese. (In real life the actual price floor was officially set at $16.10 per hundredweight of cheese. One hundredweight is 100 pounds.) At that price, according to data from the USDA, the quantity of cheese produced in 2009 by U.S. producers was 212.5 billion pounds, and the quantity demanded was 211 billion pounds. To support the price of cheese on the price floor, the USDA had to buy up to 1.5 billion pounds of cheese. The accompanying diagram shows the supply and demand curves illustrating the market for cheese.

A. In the absence of a price floor, the maximum price that a few of the consumers are willing to pay is $0.20 for a pound of cheese whereas the market equilibrium price is $0.13 per pound. The graph also shows that the minimum price at which a few of the producers are willing to sell is $0.06 per pound. In the absence of a price floor, how much consumer surplus is created?

b. How much producer surplus?

c. What is the total surplus?

D. The maximum price that a few of the consumers are willing to pay is $0.20 per pound of cheese, and the price floor is set at $0.17 per pound. With the price floor at $0.17 per pound of cheese, consumers buy 211 billion pounds of cheese. How much consumer surplus is created now?

E. The minimum price at which a few of the producers are willing to sell a pound of cheese is $0.06, and the price floor is set at $0.17 per pound. With the price floor at $0.17 per pound of cheese, producers sell 212.5 billion pounds of cheese (some to consumers and some to the USDA). How much producer surplus is created now?

F. The surplus cheese USDA buys is the difference between the number of cheese producers sell (212.5 billions pounds of cheese) and the number of cheese consumers is willing to buy at the price floor (211 billions pounds of cheese). How much money does the USDA spend on buying up surplus cheese?

G. Taxes must be collected to pay for the purchases of surplus cheese by the USDA. As a result, the total surplus (producer plus consumer) is reduced by the amount the USDA spent on buying surplus cheese. Using your answers for parts d, e, and f, what is the total surplus when there is a price floor?

H. How does this compare to the total surplus without a price floor from part c?

 

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in