consider a market with a large number of firms, an upward sloping supply curve S 0 , and a downward sloping demand curve D 0 . Assume that the market is perfectly competitive; hence, the supply curve...

consider a market with a large number of firms, an upward sloping supply curve
S₀

, and a downward sloping demand curve
D₀

.  Assume that the market is perfectly competitive; hence, the supply curve

S₀


is the sum of the marginal cost curves of all the firms.

Indicate the original competitive equilibrium price

P₀

, equilibrium quantity
Q₀

, the resulting Consumer Surplus
CS₀

, the resulting Producer Surplus
PS₀

, and the “socially optimal” output (the output the Benevolent Dictator would choose)
Q_SO

 on your graph. Graphically indicate the size of Dead-Weight Loss
DWL₀

 if there is such a loss.

In the narrative, please explain how you determined the socially optimal output level and the presence (or absence) of dead-weight loss in this situation.