If a new bicycle costs Rs300, Natalie values it at Rs400, and the producer's cost is Rs200, what is the total surplus generated if Natalie purchases the bike?
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Answer: C. Rs200
Explanation
Total surplus is the buyer's value minus the seller's cost, which is Rs 400 minus Rs 200, or Rs 200. The price only splits that surplus between them: Natalie keeps Rs 100 as consumer surplus and the producer keeps Rs 100. Shifting the price moves the gain from one party to the other without changing the total.
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