Question

Judy purchased a speedboat for $120,000. She was willing to pay $150,000. After a few years, she wanted to sell the boat for $85,000 and ended up selling it to Gary for $90,000. What is true about the surplus generated by the speedboat

Answer 1

Options:

A. Judy's producer surplus is $270,000

B. Judy's producer surplus is $5000

C. Gary's Consumer surplus is $5000

D. Judy's consumer surplus is $30000.

Answer:

B. Judy's producer surplus is $5000

D. Judy's consumer surplus is $30000.

Explanation: Surplus is a term used to describe the amount spent in excess of the Actual worth of a given asset or a material, the asset or material can either for business, convenience or for leisure.

Producer surplus is the amount which a producer expected to be paid for the supply or production of a particular product and the amount received after supply.

JUDY'S PRODUCER SURPLUS= ACTUAL AMOUNT IT WAS SOLD-THE AMOUNT THE PRODUCER IS WILLING TO SELL

=$90,000-$85,000

=$5,000.

Consumer surplus is the difference between the amount a Consumer is willing to pay for a good or service and the actual amount paid.

CONSUMER SURPLUS= THE AMOUNT THE CONSUMER IS WILLING TO PAY- THE AMOUNT THE CONSUMER PAID

$150,000-$120,000

=$30,000.