First,label the following scenarios as to whether they would create a producer or consumer surplus. Then, after you have labeled each scenario, calculate the ensuing surplus.

Question

First,label the following scenarios as to whether they would create a producer or consumer surplus. Then, after you have labeled each scenario, calculate the ensuing surplus.

Roy is willing to pay $2.50 for a sports drink. He notices the price is $2.79 and chooses not to purchase a sports drink.

Answer 1

To determine the outcome in terms of producer or consumer surplus, we need to compare the price that Roy is willing to pay for the sports drink with the actual price he sees in the market.

In this scenario:
- Consumer Surplus: Consumer surplus is the difference between the highest price a consumer is willing to pay and the actual price paid. Since Roy is willing to pay $2.50 but the price is $2.79, he would have a consumer surplus of $2.50 - $2.79 = -$0.29 (negative value means there is no consumer surplus).

- Producer Surplus: Producer surplus is the difference between the price a producer receives and the minimum price they are willing to accept. Since Roy chose not to purchase the sports drink, no producer surplus is generated.

In summary, there is no consumer surplus and no producer surplus in this scenario.

First,label the following scenarios as to whether they would create a producer or consumer surplus. Then, after you have labeled each scenario, calculate the ensuing surplus.

yes

To determine the outcome in terms of producer or consumer surplus, we need to compare the price that Roy is willing to pay for the sports drink with the actual price he sees in the market.