3. Consider a free market with demand equal to Q = 1,200 – 10P and supply equal to Q = 20P. A. What is the value of consumer surplus? What is the value of producer surplus? What is the total surplus?...

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3. Consider a free market with demand equal to Q = 1,200 – 10P and supply equal to Q = 20P.<br>A. What is the value of consumer surplus? What is the value of producer surplus? What is<br>the total surplus?<br>Qd=Qs (1200-10P) = 20P<br>%3D<br>80<br>1200 = 30P<br>Equilibrium price = $40<br>Equilibrium quantity = 80<br>니0<br>Consumer surplus = 1/2bh<br>½(120-40)*(800)=32000<br>20<br>PS = %(40-0) *(800) = 16000<br>TS = 32000+16000=48000<br>B. Now the government imposes a $10 per unit subsidy on the production of the good.<br>What is the consumer surplus now? The producer surplus? Why there is a deadweight<br>loss associated with the subsidy, and what is the size of this loss?<br>

Extracted text: 3. Consider a free market with demand equal to Q = 1,200 – 10P and supply equal to Q = 20P. A. What is the value of consumer surplus? What is the value of producer surplus? What is the total surplus? Qd=Qs (1200-10P) = 20P %3D 80 1200 = 30P Equilibrium price = $40 Equilibrium quantity = 80 니0 Consumer surplus = 1/2bh ½(120-40)*(800)=32000 20 PS = %(40-0) *(800) = 16000 TS = 32000+16000=48000 B. Now the government imposes a $10 per unit subsidy on the production of the good. What is the consumer surplus now? The producer surplus? Why there is a deadweight loss associated with the subsidy, and what is the size of this loss?

Jun 08, 2022

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3. Consider a free market with demand equal to Q = 1,200 – 10P and supply equal to Q = 20P. A. What is the value of consumer surplus? What is the value of producer surplus? What is the total surplus?...

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