Question

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.

Answer 1

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.