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29 August, 08:48

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

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  1. 29 August, 09:12
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    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.
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