GIVEN: MB = 80 - Q МС %3D 20 + Q P = 30 %3D Equilbrium with Nonmarginal Pricing What is the Market Price, Quantity, Consumer Surplus Producer Surplus Total Surplus and
GIVEN: MB = 80 - Q МС %3D 20 + Q P = 30 %3D Equilbrium with Nonmarginal Pricing What is the Market Price, Quantity, Consumer Surplus Producer Surplus Total Surplus and
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![**Given:**
- MB = 80 - Q
- MC = 20 + Q
- P = 30
**Equilibrium with Nonmarginal Pricing**
What is the Market Price, Quantity, Consumer Surplus, Producer Surplus, Total Surplus, and Deadweight Loss?
To solve the problem of finding the equilibrium with nonmarginal pricing, follow these steps:
1. **Market Price (P):** It's provided as 30.
2. **Quantity at Equilibrium (Q):** Set MB = MC to solve for Q:
\[
80 - Q = 20 + Q
\]
\[
60 = 2Q \implies Q = 30
\]
3. **Consumer Surplus (CS):** The area above the price level and below the demand curve (MB). Calculate using the formula for the area of a triangle:
\[
CS = \frac{1}{2} \times (80 - 30) \times 30 = \frac{1}{2} \times 50 \times 30 = 750
\]
4. **Producer Surplus (PS):** The area below the price level and above the supply curve (MC). Calculate using the formula for the area of a triangle:
\[
PS = \frac{1}{2} \times (30 - 20) \times 30 = \frac{1}{2} \times 10 \times 30 = 150
\]
5. **Total Surplus (TS):** The sum of consumer surplus and producer surplus:
\[
TS = CS + PS = 750 + 150 = 900
\]
6. **Deadweight Loss (DWL):** With a price set below the equilibrium level, calculate the loss in total surplus due to inefficiency. The loss occurs because the quantity produced is less than in a competitive market scenario, but without additional information, exact calculation isn't possible here.
This scenario exemplifies fundamental economic principles and aids in understanding the implications of nonmarginal pricing in markets.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F78664e34-f555-4df8-8abc-44c0302d65c7%2F858ff5ea-2b74-4883-8084-52410d148ddd%2Fve8a9i6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Given:**
- MB = 80 - Q
- MC = 20 + Q
- P = 30
**Equilibrium with Nonmarginal Pricing**
What is the Market Price, Quantity, Consumer Surplus, Producer Surplus, Total Surplus, and Deadweight Loss?
To solve the problem of finding the equilibrium with nonmarginal pricing, follow these steps:
1. **Market Price (P):** It's provided as 30.
2. **Quantity at Equilibrium (Q):** Set MB = MC to solve for Q:
\[
80 - Q = 20 + Q
\]
\[
60 = 2Q \implies Q = 30
\]
3. **Consumer Surplus (CS):** The area above the price level and below the demand curve (MB). Calculate using the formula for the area of a triangle:
\[
CS = \frac{1}{2} \times (80 - 30) \times 30 = \frac{1}{2} \times 50 \times 30 = 750
\]
4. **Producer Surplus (PS):** The area below the price level and above the supply curve (MC). Calculate using the formula for the area of a triangle:
\[
PS = \frac{1}{2} \times (30 - 20) \times 30 = \frac{1}{2} \times 10 \times 30 = 150
\]
5. **Total Surplus (TS):** The sum of consumer surplus and producer surplus:
\[
TS = CS + PS = 750 + 150 = 900
\]
6. **Deadweight Loss (DWL):** With a price set below the equilibrium level, calculate the loss in total surplus due to inefficiency. The loss occurs because the quantity produced is less than in a competitive market scenario, but without additional information, exact calculation isn't possible here.
This scenario exemplifies fundamental economic principles and aids in understanding the implications of nonmarginal pricing in markets.
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