He schedule below represents the willingness of a typical consumer to pay for wine in a year. Suppose there are 10,000 identical
consumers in the community. Price Per Bottle of Wine Bottles of Wine Consumed Per Year $50 1 $40 2 $30 3 $20 4 $10 5 Refer to Exhibit 7-5. If the market price of wine is $30, the total consumer surplus for the community equals:
a. $30,000.
b. $60,000.
c. $50,000.
d. $20,000.
a. $30,000.
b. $60,000.
c. $50,000.
d. $20,000.
1 answer:
Answer:
a. $30,000.
Explanation:
Willingness to pay is the highest amount a consumer would be willing to pay for a good or service. In this example, the willingness to pay is $50.
Consumer surplus is the difference between price of a product and the willingness to pay.
To calculate the total consumer surplus , refer to the attached image, the consumer surplus is the shaded triangle.
The total consumer surplus = 1/2 base × (height)
The height is the difference between the willingness to pay and the price of the wine = $50 -$30 =$20
The base is the total quantity purchases at $30 =
1/2 × 3 × ($20) = $30
There are 10,000 consumers, therefore consumer surplus =$30,000
I hope my answer helps you.
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Answer:
1a. 3,000 units
1b. $1,050,000
2. See attachment.
3. contribution margin income statement
Sales ($350 × 7,000 units) $2,450,000
Less Variable Cost ($245 × 7,000 units)) ($1,715,000)
Contribution $735,000
Less Fixed Costs ( $315,000)
Operating Profit $420,000
Explanation:
Break-even point (sales units ) = Fixed Cost ÷ Contribution per unit
= $315,000 ÷ ($350 - $245)
= 3,000
Break-even point (sales dollars) = Fixed Cost ÷ Contribution Margin Ratio
= $315,000 ÷ ($105/$350)
= $1,050,000
