Marcus paid $25 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Marcus’s friend Starling learns that Marcus bought a potato cannon, he asks Marcus if he will sell it for $55, and Marcus agrees. Starling is thrilled, because he would have paid Marcus up to $80 for the cannon. Marcus is also delighted. Determine the consumer surplus from the original purchase and the additional surplus generated by the resale of the cannon. Marcus’s original consumer surplus: $ Marcus’s producer surplus from the resale: $ Starling’s consumer surplus from the resale: $ Total surplus generated from the resale:

Explanation:

The consumer surplus from the original purchase : this is the difference between the actual purchase price and the price at which the consumer was willing to purchase it = $45 - $25 = $20

Additional surplus generated from the resale of the cannon:  this is difference between the actual resale price and the price at which the owner  valued it = $55 - $45 = $10

Marcus original consumer surplus is the same as the consumer surplus from the original purchase which is = $45 - $25 = $20

Marcus's producer surplus from the resale is the difference between the actual resale price and the price at which the producer valued the cannon = $55 - $45 = $10

Starling's consumer surplus from the resale is the difference between the actual resale price and the price which the Starling valued it = $80 - $55 = $30

hence the total surplus generated from the resale = $10 + $30 = $40

this is because the additional surplus generated from the resale of the cannon is the same as Marcus's producer surplus from resale therefore we just add up either of them with the value of Starling's consumer surplus from the resale of the cannon

choices : )

explanation:

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