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28 March, 01:39

Jim is haggling with a car dealer on the price of a used car. during the bargaining, Jim discovers that the car has a significant number of scratches which he had not noticed before. The total surplus from the sales has:

a. Increased

b. Decreased

c. Was not affected

d. All of the above

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Answers (2)
  1. 28 March, 02:17
    0
    c. Was not affected

    Explanation:

    the question is demanding the effect of the jim's discovery on the the total surplus from the sales

    now,

    Total Surplus = Producer Surplus + Consumer Surplus

    Jim's discovery will make the dealer reduce the price of the car

    if the dealer reduces the price, the producer surplus is reduced

    while the consumer surplus is increased

    reduction in PS leads to increase in CS

    hence, the overall effect on the Total Surplus is the same

    hence c. is the correct option
  2. 28 March, 03:57
    0
    B. Decreased

    Explanation:

    The surplus sales of the car has to reduce because the customer has to consider and bear in mind the amount of repairs to be done to the car during the transaction process. The car has lots of scratches which will need repairs which will be taken into account by the customer. The customer will have to pay less thereby lowering the surplus from the sales.
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