Asked by Alice Young on May 01, 2024
Verified
If you are willing to sell your lawn mower business for $355,000 and someone offers you $420,000 for it,this transaction will generate:
A) There is no surplus created
B) $65,000 worth of seller surplus and unknown amount of buyer surplus
C) $30,000 worth of buyer surplus and $35,000 of seller surplus
D) $65,000 worth of buyer surplus and unknown amount of seller surplus
Buyer Surplus
The difference between what consumers are willing to pay for a good or service versus what they actually pay.
Seller Surplus
The difference between the actual selling price of a good and the seller's minimum acceptable price.
- Understand the circumstances that lead to the creation of wealth or surplus through transactions.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
B
Explanation :
Seller surplus is the difference between the actual sale price and the minimum price the seller was willing to accept. Here, the seller was willing to sell for $355,000 but sold for $420,000, creating a seller surplus of $65,000. The buyer surplus cannot be determined from the information given.
Learning Objectives
- Understand the circumstances that lead to the creation of wealth or surplus through transactions.