Question

Is the contribution total surplus always positive? why or why not?

what is total surplus, consumer surplus, producer surplus at equilibrium

If coffee was fixed at $3 what is total surplus and is there and deadweight loss

Is there another way to consume the same number of cups of coffee and increase total surplus? why

cups of coffee	marginal benefit	marginal cost	total surplus	consumer surplus	producer surplus
1	4.00	1.50	8	2.50	5.50
2	3.00	1.75	6	1.25	4.75
3	2.00	2.00	4	0	4.00
4	1.00	2.25	2	-1.25	3.25
5	0	2.50	0	-2.50	2.50

Answer 1

No, the total surplus is not always positive. It can be clearly verified in this example that for 5 cups of coffee, the total surplus is zero and thus not positive.

The reason being, after some quantity, consumers get negative utility from consuming more and more.

At equilibrium, MC=MB and CS is 0 and PS is 4 and thus total surplus is 4.

For $3 price, the total surplus would be 1.25+4.75=6

The dead weight loss is (8-6)=2 [8 is the maximum TS which is obtained at $1]

The total surplus will be maximized if the quantity is 1