Many users were left aghast when, for the first time ever, Spotify announced they are raising subscription prices. The Premium Family Plan is rising from $14.99 to $15.99 a month. Source: techradar.com, May 2, 2021 Assume that the marginal social cost of streaming is zero. (This assumption means that the cost of operating a streaming service doesn't change if more people stream more songs.) Also assume the market demand is linear. (1) Draw a graph of the market for streaming music with a price of $15 a month. On your graph, show consumer surplus and producer surplus. (2) With a price of $15 a month, is the market efficient or inefficient? If it is inefficient, show the deadweight loss on your graph. (upload your graph)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question
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Many users were left aghast when, for the first time ever, Spotify announced they are raising
subscription prices. The Premium Family Plan is rising from $14.99 to $15.99 a month.
Source: techradar.com, May 2, 2021
Assume that the marginal social cost of streaming is zero. (This assumption means that the
cost of operating a streaming service doesn't change if more people stream more songs.)
Also assume the market demand is linear.
(1) Draw a graph of the market for streaming music with a price of $15 a month. On your
graph, show consumer surplus and producer surplus.
(2) With a price of $15 a month, is the market efficient or inefficient? If it is inefficient, show
the deadweight loss on your graph. (upload your graph)
Transcribed Image Text:Many users were left aghast when, for the first time ever, Spotify announced they are raising subscription prices. The Premium Family Plan is rising from $14.99 to $15.99 a month. Source: techradar.com, May 2, 2021 Assume that the marginal social cost of streaming is zero. (This assumption means that the cost of operating a streaming service doesn't change if more people stream more songs.) Also assume the market demand is linear. (1) Draw a graph of the market for streaming music with a price of $15 a month. On your graph, show consumer surplus and producer surplus. (2) With a price of $15 a month, is the market efficient or inefficient? If it is inefficient, show the deadweight loss on your graph. (upload your graph)
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