Answered: Consider the market for full-sized…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the market for full-sized sports utility vehicle. Please box in mathematical solutions. Suppose the following equations describe market demand and market supply for these vehicles:Inverse Demand Function: MB = 180,000–QdMarginal Cost Function:MC = 0.25 Qs

a.Determine the market equilibrium price and quantity and denote them by P0and Q0. Show your answer both graphicallyand mathematically. No lazy plotting; be accurate. Use larger graphs for clarity.

b.What is total surplus at this equilibrium? Calculate surplus numerically as well as indicate the area on the graph that corresponds with total surplus.

part a

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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