Q3) A) The demand and supply functions of a product is given as P=200 – 0.5Q and P = 100+0.5Q, respectively. Solve for the equilibrium price and quantity in the product market. If the product has an external benefit of $20, analyse the market and determine the social optimal quantity. Compute the deadweight loss if the market operates at its equilibrium level. Support your answers with a suitable market diagram. What can the government do to restore efficiency in the product market? B) Consider two consumers of a product, A and B, with an individual demand function Qa = 400 – 5P, and Qb = 300 – 2.5Pb, respectively, where P is the price in dollars and Q is the quantity demanded.
Q3) A) The demand and supply functions of a product is given as P=200 – 0.5Q and P = 100+0.5Q, respectively. Solve for the equilibrium price and quantity in the product market. If the product has an external benefit of $20, analyse the market and determine the social optimal quantity. Compute the deadweight loss if the market operates at its equilibrium level. Support your answers with a suitable market diagram. What can the government do to restore efficiency in the product market? B) Consider two consumers of a product, A and B, with an individual demand function Qa = 400 – 5P, and Qb = 300 – 2.5Pb, respectively, where P is the price in dollars and Q is the quantity demanded.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
solve it correctly and fast. Handwritten answer for fast answering. I will rate accordingly. This is my last attempt……
![Q3)
A) The demand and supply functions of a product is given as P=200 – 0.5Q and P = 100+0.5Q, respectively.
Solve for the equilibrium price and quantity in the product market. If the product has an external benefit of
$20, analyse the market and determine the social optimal quantity. Compute the deadweight loss if the
market operates at its equilibrium level. Support your answers with a suitable market diagram. What can the
government do to restore efficiency in the product market?
B) Consider two consumers of a product, A and B, with an individual demand function Qa = 400 – 5P, and Qb =
300 – 2.5Pb, respectively, where P is the price in dollars and Q is the quantity demanded.
I)
Obtain and anaylse the marginal social benefit function if the product is a public
good. Support your answers with a suitable diagram|
If the marginal cost of producing the public good is $10, compute the optimal quantity
of the public good. How will your answer be different if the marginal cost is $30
instead?
II)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3cb1a8a0-205e-47af-836f-16be70c750fc%2F6e3f0199-f3cb-4ec6-8457-eebf8818e132%2Fc0gpjkg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Q3)
A) The demand and supply functions of a product is given as P=200 – 0.5Q and P = 100+0.5Q, respectively.
Solve for the equilibrium price and quantity in the product market. If the product has an external benefit of
$20, analyse the market and determine the social optimal quantity. Compute the deadweight loss if the
market operates at its equilibrium level. Support your answers with a suitable market diagram. What can the
government do to restore efficiency in the product market?
B) Consider two consumers of a product, A and B, with an individual demand function Qa = 400 – 5P, and Qb =
300 – 2.5Pb, respectively, where P is the price in dollars and Q is the quantity demanded.
I)
Obtain and anaylse the marginal social benefit function if the product is a public
good. Support your answers with a suitable diagram|
If the marginal cost of producing the public good is $10, compute the optimal quantity
of the public good. How will your answer be different if the marginal cost is $30
instead?
II)
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 3 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education