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Producer, consumer and combined surplus

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Please refer attached file for graph.

Suppose the market for watermelons can be described by the graph below.

a. If Jon's maximum willingness to pay for a watermelon is $8, how much surplus per unit is he receiving at the market price of $6?
b. Suppose Figgy Farms requires at least $5 per watermelon before they will sell in this market. What is Figgy's producer surplus per unit in this market?
c. How much total consumer surplus is received in this market?
d. How much total producer surplus is received in this market?
e. What is the combined surplus in the market?

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Solution Summary

Solution provides the formulas and step by step calculations to find out the
1. Producer Surplus
2. Consumer Surplus and
3. Combined surplus

Solution Preview

a) Consumer surplus = Maximum willingness to pay - Price = $8 - $6 = $2

b) Producer surplus = Minimum acceptable ...

Solution provided by:
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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