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29 May, 10:51

Suppose you recently sold your used car. Assume that no new production was involved in this transaction. Wealth was created because the value of your willingness to sell was the buyer's willingness to pay. Suppose you sold the car for $25,000. If the minimum price, or "bottom line," you would accept for the car is $19,000 and the most the buyer is willing to pay is $33,000, then the seller surplus is $ and the buyer surplus is $. The total surplus created by the transaction is $

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  1. 29 May, 13:23
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    The total surplus created by the transaction is $14,000.

    Explanation:

    Price of selling the car = $ 25,000

    Minimum price = $19,000

    Maximum price = $33,000

    Seller surplus = selling price of car - minimum price the seller would accept

    = $25,000 - $19,000

    = $ 6,000

    Buyer surplus = price buyer is willing to pay - price paid by buyer

    = $33,000 - $25,000

    = $ 8,000

    Total surplus = seller surplus + buyer surplus

    = $6,000 + $8,000

    = $14,000
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