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1)Suppose the market demand function (expressed in dollars) for a normal product is P = 100 - 2Q and the Supply Curve is P= 100 + 2Q, where P is the price of the product and Q is the quantity demanded or supplied. Assume that the Marginal External Cost curve is MEC = 5 + 0.5Q. Here are the specific questions: 

a.In a competitive market

i.What is the equilibrium price and quantity?

ii. How much is the Consumer Surplus?

iii. How much is Producer Surplus (P.S.)?

iv. How is the total external cost (TEC)?

v.What the Total Welfare (sum of C.S. and P.S. minus TEC)?

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Yusra AneesLv10
28 Sep 2019
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Related questions

The market demand for gadgets is given byQD=100-3p , where QD is the quantity of gadgets demanded and p is the price of a gadget in dollars. The market supply is given byQ S=p , where QS is the quantity of gadgets supplied. The production of gadgets releases a toxic effluent into the water supply. The marginal external cost can be described by MEC Q=2Q. a) Compute consumer surplus, producer surplus and the cost pf pollution in the market equilibrium. b) Compute consumer surplus, producer surplus and the cost pf pollution in the social optimum. c) Suppose the government is considering imposing a tax of $T per unit on the producers. Find the level of the tax that ensures the socially optimal amount of gadgets will be produced in a competitive equilibrium.

The market demand for gadgets is given by Qd=100-3p, where Qd is the quantity of gadgets demanded and p is the price of a gadget in dollars. The market supply is given byQs= p, where Qs is the quantity of gadgets supplied. The production of gadgets releases a toxic effluent into the water supply. The marginal external cost can be described by MEC(Q)= 2Q.

a) Compute consumer surplus, producer surplus, and the cost of pollution at the market equilibrium.

b) Compute consumer surplus, producer surplus, and the cost of pollution at the social optimum.

c) Suppose the government is considering imposing a tax of $T per unit on the producers. Find the level of the tax that ensures the socially optimal amount of gadgets will be produced in a competitive equilibrium.

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a. Determine the quantity demanded and quantity supplied for p = $4, 5, 6, 14. Determine the equilibrium quantity and price.

b. For prices p = $4, 5, 6, 14, determine the consumer surplus. How does an increase in price affect the consumer surplus?

c. For prices p = $4, 5, 6, 14, determine the producer surplus. How does an increase in price affect the producer surplus?

d. Suppose the government limits the quantity traded in the market to 6 units. Calculate the resulting deadweight loss.

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