Question

At the end of the term, Vicky wants to sell her economics textbook for at least $25, otherwise she would keep it. George is looking to buy a textbook because he's taking the class next term and he is willing to pay at most $60. If Vicky agrees to sell the textbook to George for $45: a) George's consumer surplus is $60 and Vicky's producer surplus is $25. b) George's consumer surplus is $20 and Vicky's producer surplus is $15. c) George's consumer surplus is $15 and Vicky's producer surplus is $20. d) George's consumer surplus is $45 and Vicky's producer surplus is $45. Save

Answer 1

Answer:

c) George's consumer surplus is $15 and Vicky's producer surplus is $20

Explanation:

The formula to compute the producer surplus and the consumer surplus is shown below:

Producer surplus = Market price - Actual amount to sell the goods

And, the consumer surplus = Willing to pay - Market price

So, the producer surplus

= $45 - $25

= $20

And, the consumer surplus is

= $60 - $45

= $15

Therefore, the correct option is c.