Question

Juan is willing to buy the last ticket to the Meathead concert for $120, while Mara is willing to pay $250. Juan is first in line and buys a ticket for $120. Juan could sell his ticket to Mara for $200, but he can't because of government regulation preventing the reselling of tickets. The regulation, then, is causing:

Answer 1

Answer:

Potential total surplus to increase.

Explanation:

As we know that:

Producer Surplus = Market value - Minimum price to sell

This means that for Juan:

Market value at which he can sell the ticket to Mara was $200 and the minimum price that he will accept will be $120

By putting values, we have:

Liam's surplus = $200 - $120 = $70

Now

Consumer Surplus = Consumer willing to Pay - Consumer Paid

For Alexander, the amount he was willing to pay was $250 and what he actually paid was $200 if the regulation hasn't intervened.

Alexander's surplus = $250 - $200 = $50

This means that the regulation prevents the increase in the potential total surplus and this has increased the dead weight loss of $120 ($70 + $50).