Answered: There is a monopolist, Concrete Mex, in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

There is a monopolist, Concrete Mex, in the concrete market in Mexico. The demand function is Qd= 100-50p. The marginal cost of production is c = 0.4.

a) Calculate the consumer surplus, producer surplus, deadweight loss, and illustrate them in a graph.

b) ConcreteMex claimed the high price is due to high transportation costs and persuaded the government to help cut down the costs. As a result, for every unit of concrete sold, the government subsidizes Concrete Mex 0.2 dollars. Under the subsidy policy and the new price, calculate the consumer surplus, ptooducer surplus, and deadweight loss. You do not need to consider government spending for thee deadweightoss.

c) What is the total government expenditure for the subsidy policy? Compare your answers in questions a and b. , and argue who benefit more from the policy, the consumers or ConcreteMex? Illustrate and explain how the producer surplus changes from Question 1.2 to 1.4 in a diagram.

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