19. Consumer Surplus, Producer Surplus, and Deadweight Loss with Quantity Restrictions M The following graph shows the supply of (orange curve) and demand for (blue curve) dive computers. Determine the equilibrium price and quantity of dive computers. Based on this, use the green triangle (triangle symbols) to shade the area representing consumer surplus at the equilibrium price. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus at the equilibrium price. PRICE (Euros per dive computer) 200 160 120 80 40 0 False True Supply 20 Demand 100 CS 40 60 80 Help QUANTITY (Millions of dive computers] PS Aa Aa Clear All Assume the preceding graph represents the market for dive computers in the long run. True or False: The area between the price and the supply curve represes the profit firms earn on intra-marginal units.

19. Consumer Surplus, Producer Surplus, and Deadweight Loss with Quantity Restrictions M The following graph shows the supply of (orange curve) and demand for (blue curve) dive computers. Determine the equilibrium price and quantity of dive computers. Based on this, use the green triangle (triangle symbols) to shade the area representing consumer surplus at the equilibrium price. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus at the equilibrium price. PRICE (Euros per dive computer) 200 160 120 80 40 0 False True Supply 20 Demand 100 CS 40 60 80 Help QUANTITY (Millions of dive computers] PS Aa Aa Clear All Assume the preceding graph represents the market for dive computers in the long run. True or False: The area between the price and the supply curve represes the profit firms earn on intra-marginal units.

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

Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.

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19. Consumer Surplus, Producer Surplus, and Deadweight Loss with Quantity
Restrictions
M
The following graph shows the supply of (orange curve) and demand for (blue curve) dive computers.
Determine the equilibrium price and quantity of dive computers. Based on this, use the green triangle (triangle
symbols) to shade the area representing consumer surplus at the equilibrium price. Then, use the purple triangle
(diamond symbols) to shade the area representing producer surplus at the equilibrium price.
PRICE (Euros per dive computer)
200
160
120
80
40
0
False
True
Supply
20
Demand
100
CS
40
60
80
Help
QUANTITY (Millions of dive computers]
PS
Aa Aa
Clear All
Assume the preceding graph represents the market for dive computers in the long run.
True or False: The area between the price and the supply curve represes the profit firms earn on intra-marginal
units.

Total surplus in this market is
Hint: You can hover the mouse over the shaded regions to see their areas (in millions of euros).
Assume the government mandates that no more than 30 million dive computers can be produced. The black line on
the graph shows the production restriction of 30 million dive computers. Assume that the new equilibrium price is
€120, and that the lowest-cost producers make the dive computers.
Use the green triangle (triangle symbols) to shade the area representing total consumer surplus after the
production restriction. Next, use the purple quadrilateral (diamond symbols) to shade the area representing total
producer surplus after the production restriction. Finally, use the red triangle (cross symbols) to shade the area
representing the deadweight loss (DWL) caused by the production restriction.
PRICE (Euros per dive computerl
200
160
120
80
40
0
20
40
60
QUANTITY [Millions of dive computers] Help
80
100
CS
Deadweight Loss
Clear All

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