Consider the Following Supply and Demand Diagrams

Question

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The Answer is (a)The calculations of consumer and producer surplus:
Surplus in Diagram A:
Consumer surplus = 0.5 × 5 × 10 = 25
Producer surplus = 0.5 × 5 × 10 = 25
Total surplus = 50
Surplus in Diagram B:
Consumer surplus = 0.5 × 2 × 10 = 10
Producer surplus = 0.5 × 8 × 10 = 40
Total surplus = 50
(b)If there are more consumers than producers,the majority of the society might prefer the outcome from Diagram A for distributional reasons (since obviously consumers get more surplus in Diagram A).

Consider the Following Supply and Demand Diagrams

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