Table 7-11[table]
Price(Dollars per unit) | Quantity Demanded(Units) | Quantity Supplied(Units) 12.00 | 0 | 36 10.00 | 3 | 30 8.00 | 6 | 24 6.00 | 9 | 18 4.00 | 12 | 12 2.00 | 15 | 6 0.00 | 18 | 0
[/table]Refer to Table 7-11. At a price of $2.00, total surplus is

Question

Table 7-11​[table]
Price(Dollars per unit) | Quantity Demanded(Units) | Quantity Supplied(Units) 12.00 | 0 | 36 10.00 | 3 | 30 8.00 | 6 | 24 6.00 | 9 | 18 4.00 | 12 | 12 2.00 | 15 | 6 0.00 | 18 | 0
[/table]​​​Refer to Table 7-11. At a price of $2.00, total surplus is

BlackTom AI · Accepted Answer

First, I restate the problem setup to ensure clarity: we are given Table 7-11 with price, quantity demanded, and quantity supplied at various price levels, and we are asked to determine whether total surplus at a price of $2.00 is smaller, larger, or equal to the total surplus at the equilibrium price.

From the table, identify the equilibrium (where quantity demanded equals quantity supplied):
- At price $4.00, Qd = 12 and Qs = 12. Hence, the equilibrium price is $4.00 and the equilibrium quantity is 12 units.

Next, determine the total surplus at the price of $2.00. The actual traded quantity at price $2.00 is the smaller of Qd and Qs, which is 6 units (Qd = 15, Qs = 6).

To compute total surplus at P = $2.00, decompose it into consumer surplus (CS) and producer surplus (PS) using the implied linear demand and supply curves:
- Demand: From the table, when Qd = 0, P = 12; when Qd = 18, P = 0. This implies a linear demand curve. The inverse demand can be written as P(Q) = 12 − (2/3)Q. At Q = 6 (the quantity traded), the marginal willingness to pay is P = 12 − (2/3)*6 = 8.
  Consumer surplus is the area above the price and below the demand curve for the traded quantity: CS = ∫ from 0 to 6 [P(Q) − 2] dQ = ∫0^6 [12 − (2/3)Q − 2] dQ = ∫0^6 [10 − (2/3)Q] dQ = [10Q − (1/3)Q^2]0^6 = 60 − 12 = 48.
- Supply: From the table, when P = 0, Qs = 0; when P = 12, Qs = 36. This implies a linear supply curve with Qs = 3P (or inverse supply P(Q) = Q/3). For the traded quantity of 6 units, the cost to producers up to Q = 6 is the area under the supply curve up to Q = 6, relative to the price received (P = 2). Producer surplus is PS = ∫0^6 [2 − (Q/3)] dQ = [2Q − Q^2/6]0^6 = 12 − 6 = 6.

Total surplus at P = $2.00 equals CS + PS = 48 + 6 = 54.

Now compare this to the total surplus at the equilibrium price:
- At equilibrium (P = $4, Q = 12), the traded quantity is 12, and total surplus is maximized because no mutually beneficial trades are left unexploited and there is no excess demand or supply.
- Since the equilibrium price yields the maximum possible total surplus, any deviation from equilibrium (such as a price of $2.00 causing only 6 units to trade) results in a smaller total surplus.

Therefore, the statement 'a. smaller than it would be at the equilibrium price.' is correct because total surplus is maximized at equilibrium and is smaller when the price is below equilibrium, leading to fewer trades and a loss of potential gains from trade.

Table 7-11[table] Price(Dollars per unit) | Quantity Demanded(Units) | Quantity Supplied(Units) 12.00 | 0 | 36 10.00 | 3 | 30 8.00 | 6 | 24 6.00 | 9 | 18 4.00 | 12 | 12 2.00 | 15 | 6 0.00 | 18 | 0 [/table]Refer to Table 7-11. At a price of $2.00, total surplus is

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Table 7-11​[table] Price(Dollars per unit) | Quantity Demanded(Units) | Quantity Supplied(Units) 12.00 | 0 | 36 10.00 | 3 | 30 8.00 | 6 | 24 6.00 | 9 | 18 4.00 | 12 | 12 2.00 | 15 | 6 0.00 | 18 | 0 [/table]​​​Refer to Table 7-11. At a price of $2.00, total surplus is

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Question at position 6 What are the values of total surplus before and after tax imposition?(TS0=10.5,TS1=6)\left(TS^0=10.5,TS^1=6\right)(TS0=12.5,TS1=10)\left(TS^0=12.5,TS^1=10\right)(TS0=13.5,TS1=12)\left(TS^0=13.5,TS^1=12\right)(TS0=15,TS1=10.5)\left(TS^0=15,TS^1=10.5\right)

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Table 7-11[table] Price(Dollars per unit) | Quantity Demanded(Units) | Quantity Supplied(Units) 12.00 | 0 | 36 10.00 | 3 | 30 8.00 | 6 | 24 6.00 | 9 | 18 4.00 | 12 | 12 2.00 | 15 | 6 0.00 | 18 | 0 [/table]Refer to Table 7-11. At a price of $2.00, total surplus is