Asked by Colin Stubblefield on Jul 15, 2024
Verified
A consumer values a house at $525,000 and a producer values the same house at $485,000.If the transaction is completed at $510,000,the transaction will generate:
A) No surplus
B) $25,000 worth of seller surplus and unknown amount of buyer surplus
C) $15,000 worth of buyer surplus and $25,000 of seller surplus
D) $25,000 worth of buyer surplus and unknown amount of seller surplus
Producer Values
The set of ethical principles and standards that guide the behavior and practices of producers or manufacturers.
Buyer Surplus
Buyer surplus is the difference between the maximum amount a consumer is willing to pay for a good or service and the actual amount paid.
- Apprehend the contexts in which transactions engender wealth or surplus.
Verified Answer
DD
Deniz DomaniçJul 18, 2024
Final Answer :
C
Explanation :
The consumer's willingness to pay (or value) for the house is $525,000, while the producer's cost (or value) is $485,000. The transaction is completed at $510,000, which is between the two parties' values.
Therefore, the buyer (consumer) gains a buyer surplus of $15,000 ($525,000 - $510,000), and the seller (producer) gains a seller surplus of $25,000 ($510,000 - $485,000). Together, they generate a total surplus of $40,000.
Therefore, the buyer (consumer) gains a buyer surplus of $15,000 ($525,000 - $510,000), and the seller (producer) gains a seller surplus of $25,000 ($510,000 - $485,000). Together, they generate a total surplus of $40,000.
Learning Objectives
- Apprehend the contexts in which transactions engender wealth or surplus.