There are four consumers willing to pay the following amounts for an electric car:

Consumer 1:	Consumer 2:	Consumer 3:	Consumer 4:
$70

,000

$30

,000

$90

,000

$40

,000

There are four firms that can produce electric cars. Each can produce one car at the following costs:

Firm A:	Firm B:	Firm C:	Firm D:
$20

,000

$80

,000

$30

,000

$40

,000

Each firm can produce at most one car. Suppose the market for electric cars is competitive.

Why is the equilibrium price in this market

$40,000?

A.

At this price, the quantity demanded (three cars) equals the quantity supplied (three cars).

B.

At this price, three consumers are willing to buy an electric car and three firms are willing to sell an electric car.

C.

At

$40,000,

three consumers have reservation values equal to or above

$40,000

and three firms have reservation values equal to or below

$40,000.

D.

All of the above.

Which firms will produce an electric car if the price is

$40,000?

1.

Upper A

,

C, and D.

2.

Upper A

,

Upper B

,

and D.

3.

Upper A

,

Upper B

,

and C.

4.

Upper B

,

C, and D.

Which consumers will buy an electric car when the price is

$40

,000?

A.

1, 3, and

2

.

B.

1, 3, and

4

.

C.

4

,

2

,

and 3.

D.

4

,

2

,

and 1.

Complete the following table by calculating consumer surplus, producer surplus, and social surplus when the market price is

$40

,000.

(Enter

your responses to the nearest

dollar.)

Consumer Surplus

=?

Producer Surplus	=	?
Social Surplus	=	?

Click to select your answer(s).