Answered: What is the dollar value of the total…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 16RQ: What is the key difference between a fee-for-service healthcare system and a system based on health...

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ADVANCED ANALYSIS Assume the following values for the diagrams below: Q₁ = 16 bags. Q₂ = 11 bags. Q₃ = 23 bags. The market equilibrium price is $53 per bag. The price at point a is $85 per bag. The price at point c is $5 per bag. The price at point d is $63 per bag. The price at point e is $38 per bag. The price at point f is $74 per bag. The price at point g is $39 per bag. Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions.

a. What is the dollar value of the total surplus (= producer surplus + consumer surplus) when the allocatively efficient output level is produced?

What is the dollar value of the consumer surplus at that output level?

b.What is the dollar value of the deadweight loss when output level Q₂ is produced?

What is the total surplus when output level Q₂ is produced?

c.What is the dollar value of the deadweight loss when output level Q₃ is produced?

What is the dollar value of the total surplus when output level Q₃ is produced?

Price (per bag)
C
(a)
Efficiency loss from underproduction
d
$
D
Quantity (bags)
Instructions: Round your answers to two decimal places.
Price (per bag)
C
(b)
Efficiency loss from overproduction
f
9
93
Quantity (bags)
$
D

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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