QUESTION 8.5CHOOSE THE CORRECT ANSWER(S)

In Figure 8.9a (page 330), the market equilibrium output and price of the bread market is shown to be at (Q*,P*) = (5,000, 2). Suppose that the mayor decrees that bakeries must sell as much bread as consumers want, at a price of 1.50. Which of the following statements are correct?

.. j W File Edit View G'o Tools Window Help Q U .ABC 4,? EI- Sun3147PM Q o icourseherocom C; i] 131 ' 'L' \"'7 iii The_Economy_Unit,8_20200331.pdf (page 18 of 48) 1. The consumer surplus At the equilibrium price of 2 in the bread market, a consumer who is willing to pay 3.50 obtains a surplus of 1.50. allocation of a differentiated product, Unit 7. The equilib- rium quantity of bread is at the point where the market supply curve, which is also the marginal cost curve, crosses the demand curve, and the total surplus is the whole of the area between the two curves. Figure 7.13 showed that in the market for Beautiful Cars, the manufacturer chooses to produce "5 aaxeeaema :4 4.0 supply (marginal cost) 3.5 3.0 25 Consumer surplus Screen Shot 2020-10...6t43 P 2.0 ---------------------------------------- 1-5 Producar surplus 1.0 Screen Shot 05 zozo-1o...1.oe P 0.0 , 0 1,000 2,000 3,000 4.000 5,000 6,000 7.000 8,000 9.000 10.000 Quantity of loaves Q - Figure 8.93 Equilibrium in the bread market: Gains from trade. Screen Shot 2020-11...8.26 PM 3. The producer surplus 4. Total producer surplus Remember from Unit 7 that the The shaded area below 2 is the sum of producer's surplus on a unit of output is the bakeries' surpluses on every loaf the difference between the price at that they produce. The whole shaded which it is sold, and the marginal cost area shows the sum of all gains from of producing it. The marginal cost of trade in this market, known as the total 611' Tools Window Help U I) o u AA O i coursehero.com Ia Thejconomy_Unit_8_20200331.pdf (page 23 of 48) ll viiai. il