113 review questions copy

The aggregate wtp among the buyers is 3400 calculated

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Unformatted text preview: n those trades are buyers 1 – 4, and sellers 1 – 4. The aggregate WTP among the buyers is 3400 (calculated as 1000 + 900 + 800 + 700), and the aggregate WTA among the sellers is 2000 (calculated as 350 + 450 + 550 + 650). Thus, the aggregate social surplus created by trade in this market is 3400 – 2000 = 1400. (The answer to Question 18 is calculated in the same way). A B The key to Q16 is to re-order the lists. List WTP in descending order (1600, 1500, etc.) and list WTA in ascending order (450, 550, etc.). The names we have assigned to buyers and sellers (1, 2, 3, etc.) are arbitrary, so we can order them however we wish. What matters is that the demand curve plots WTP from highest to lowest (since we wish to plot how many buyers would be willing to pay a certain price, and how many would not), while the supply curve plots WTA from lowest to highest (since we wish to plot how many sellers would be willing to accept a certain price, and how many would not). C B A We know that social surplus is maximized because any trade beyond the equi...
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This document was uploaded on 03/03/2014.

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