Question

4. Suppose the following market represents the market for pizza. P 18- 16 14 12 10 8 6 D Pizzas/day 200 800 400 600 Answer questions 4a-4d based on the above graph. AO

Please answer all parts of question, 4a - 4g. Thank you!

4a. How much is the consumer surplus at the market equilibrium price?

b. How much is the producer surplus at the market equilibrium price?

c. How much is the total surplus at the market equilibrium price?

d. Suppose the government imposes a price floor at $10 per pizza in this market. With the price floor, how much are consumer surplus, producer surplus, and total surplus?

i. Consumer surplus is equal to

e. ii. Producer surplus is equal to

f. iii. Total surplus is equal to

g. How much is the deadweight loss due to the price floor?

Answer 1

ANSWER 0 (49) the equilibrium consumer price and surplu – below It the is the demand area above curve. - 1x (16- 8)X (400-0) x 87 400 $ 1600 so consumer Surplus $1600 equilibrium (6) produces surplus = price and above It is the area below the the supply curve. - tx (8-0) x (400-0) = x x 400 $1600 so produces surples- $1600 produces suxplus surplus+ ( Total consumer surplus 1600 11600 So Total surples. - $3200

(d) price floor of $10 Supplies Consumer price floor - Deadweight loss producer surples 2 4 7 200 300 400 600 800 Pizzas) day W consumer Supplies - (16-10) x (300-0) box 6 x 300 = $900 so comumeo surplus = $900 li producer Surplus (10-6) x (300-01 4x300 = $1200 - 1x (6-0) x (300-0) by 300 $ 900 so produces surples 1200 + 900 $2/00

producer 6 Surplay - Surplus m consumer Total surplas a 2 - 9oot 2100 $3000 price floor (10) Dead weight loss due to 25x (10-8)X (400-300) - 3x ZX 100 - $100 zbox ( 8-69(400-300) x 2 x 100 - $100 So Dead weight loss loo +100 = $200