1) At the equilibrium price, a. The consumer surplus is $ b. The producer surplus is $ c. The social surplus is $_ 2) If the government imposes a limit to production of 4 units, the deadweight loss is $ 13 12+ 11- 10+ 9+ 8+ 4- 2+ 1 S 1 12345 Source: Khan Academy VI S D 7 8 9 10 11 12 13 14 10-11 13 14 Q

1) At the equilibrium price, a. The consumer surplus is $ b. The producer surplus is $ c. The social surplus is $_ 2) If the government imposes a limit to production of 4 units, the deadweight loss is $ 13 12+ 11- 10+ 9+ 8+ 4- 2+ 1 S 1 12345 Source: Khan Academy VI S D 7 8 9 10 11 12 13 14 10-11 13 14 Q

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Total Surplus and Deadweight Loss

Economists generally define efficiency as when it is impossible to improve the situation of one party without imposing a cost on another. Conversely, if a situation gets inefficient, a party will benefit more than the other without imposing costs on others.

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1) At the equilibrium price,
a. The consumer surplus is $
b. The producer surplus is $_
c. The social surplus is $
2) If the government imposes a limit to production
of 4 units, the deadweight loss is $
P
14+
13
12+
11+
10+
9+
8+
S
1
VI
Source: Khan Academy
S
D
12345 6 7 8 9 10 11 12 13 14

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Step 2: Determine the consumer surplus:

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Step 3: Determine the producer surplus:

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Step 4: Determine the deadweight loss when production limit is at Q =4 is imposed:

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3. Assume the minimum price needed for a producer to sell a good is $7, and the maximum price a buyer is willing to pay for the good is $13. If the good sells for $11, what is producer surplus? What is consumer surplus? 4. On the graph below, determine the areas of consumer surplus and
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Note :hand written solution should be avoided.
Calculate the consumers surplus, producer surplus. and total surplus when no price restrictions are in place