Microeconomics

posted by .

ADVANCED ANALYSIS Assume the following values for Figures 5.4a and Figures 5.4b. Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags. The market equilibrium price is $45 per bag. The price at a is $85 per bag. The price at c is $5 per bag. The price at f is $59 per bag. The price at g is $31 per bag. Apply the formula for the area of a triangle (Area = Base Height) to answer the following questions. LO2 a. What is the dollar value of the total surplus (producer surplus plus consumer surplus) when the allocatively efficient output level is being produced? How large is the dollar value of the consumer surplus at that output level? b. What is the dollar value of the deadweight loss when output level Q2 is being produced? What is the total surplus when output level Q2 is being produced? c. What is the dollar value of the deadweight loss when output level Q3 is produced? What is the dollar value of the total surplus when output level Q3 is produced?

  • Microeconomics -

    if you find out B. let me know

  • Microeconomics -

    ADVANCED ANALYSIS Assume the following values for the figures below: Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags. The market equilibrium price is $45 per bag. In Figure (a), the price at point a is $85 per bag. The price at point c is $5 per bag. The price at point d is $55 per bag, and the price at point e is $35 per bag. In Figure (b), the price at point f is $59 per bag. The price at point g is $31 per bag. Values for points a, b, and c are the same as in Figure (a). Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions.

  • Microeconomics -

    Explanation:
    a. Total surplus is the area bounded by points a, b, and c. To calculate total surplus, we use the following formula for the area of a triangle: Area = ½ × Base × Height. The area between the demand curve and the supply curve for the quantity ranging from 0 to 20 is the total economic surplus. This is a triangle with a base (best read off the price axis) of $80, which is the price difference at Q = 0, or between points a and c, and a height of 20 (the number of units purchased in equilibrium). Using these values, we have a total surplus of (1/2) × $80 × 20 = $800.

    The consumer surplus is the area between the demand curve and the equilibrium price line. Here we have a base of $40 (the price difference between the demand schedule price at Q = 0, which is $85, and the equilibrium price of $45). The height of the triangle is once again 20 (the number of units purchased in equilibrium). Using these values, we have a consumer surplus of (1/2) × 40 × 20 = $400.

    b. Deadweight loss is the difference in total surplus between an efficient level of output Q1 and a reduced level of output at Q2. We can calculate this as the area of a triangle bounded by points bde. The base of this triangle is the difference in prices at points d and e, or $55 – $35 = $20. The height of this triangle is given by the difference in the restricted level of output of Q2 = 15 and the efficient level of output Q1 = 20, or 5 units. Thus, the area of this triangle (the deadweight loss) is equal to (1/2) × $20 × 5 = $50. The remaining total surplus can be found by subtracting the deadweight loss from the original (efficient) total surplus. This is $800 (maximum total surplus) – $50 (deadweight loss) = $750.

    c. The deadweight loss from overproduction is the difference in total surplus between an efficient level of output Q1 and an additional level of output at Q3. We can calculate this as the area of a triangle bounded by points bfg. The base of this triangle is the difference in prices at points f and g, or $59 – $31 = $28. The height of this triangle is given by the difference in the additional level of output Q3 = 27 and the efficient level of output Q1 = 20, or 7 units. Thus, the area of this triangle (the deadweight loss) is equal to (1/2) × $28 × 7 = $98. The remaining total surplus can be found by subtracting the deadweight loss from the original total surplus. This is $800 (maximum total surplus) – $98 (deadweight loss) = $702. Note here that we maximize total (producer + consumer) surplus by producing the equilibrium quantity, but we lose surplus from overproduction (inefficient use of resources).

  • Microeconomics -

    B is wrong

  • Microeconomics -

    A. $800, $600
    B. $50, $750
    C. $98, $702

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Finance

    Break Even Analysis Healthy Foods Inc. Product 50 lb. bags Price $12.50 Per bag Fixed Costs $68,000 Variable Costs $0.15 Per lb. Annual Interest Exp $7,500 a. What is the break-even point in bags?
  2. MATH (ASAP)

    Jay and Tia are planning to buy snack chips. • Individual bags of chips cost $3.00 each. • Each case of chips contains 10 bags and costs $25.00. a. If Jay buys 1 case of chips, what is the cost per bag?
  3. statistics

    At the start of December 2001, the retail price of a 25kg bag of cornmeal was $10 in Zambia, while by the end of the month, the price had fallen to $6. The result was that one retailer reported an increase in sales from 3 bags/day …
  4. algebra

    A chicken farm orders bags of feed from two farmers. Store X charges $20 per bag, and store Y charges $15 per bag. The farm must obtain at least 60 bags per week to care for the chickens properly. Store Y can provide a maximum of 40 …
  5. Quantitative Business Analysis

    The market for 40 lb. bags of pine bark mulch (sold at John's shop) is described by the following functions: p = -.3q + 66 p = 1.3q - 30 where p is the price per unit and q is the number of bags bought and sold. a) Which of the functions …
  6. Programming

    using c++ write a program that accepts the unit weight of a bag of coffee in pounds and the number of bags sold and display the number of bags sold ,the weight per bag price per pound sales tax and total price of the sale.the unit …
  7. 8th grade math and algebra class

    A bird seed store is running a sale, when as you buy additional bags of seed you get a reduction in price on the additional bags. - first and second bags cost $20/bag - third through fifth bag cost $15/bag - sixth through tenth bags …
  8. Economics

    Given the following diagrams: Q1 = 16 bags. Q2 = 11 bags. Q3 = 23 bags. The market equilibrium price is $53 per bag. The price at point a is $85 per bag. The price at point c is $5 per bag. The price at point d is $63 per bag. The …
  9. Calculus

    A nut store sells 200 bags of almonds per month at a price of $5 per bag. For every $0.20 decrease in the price, the store sells five more bags per month. Determine the marginal revenue when 120 bags are sold.
  10. Calculus

    A nut store sells 200 bags of almonds per month at a price of $5 per bag. For every $0.20 decrease in the price, the store sells five more bags per month. Determine the marginal revenue when 120 bags are sold.

More Similar Questions