Answer the following questions based on the graph that represents JR\'s weekly d

Question

Answer the following questions based on the graph that represents JR's weekly demand for ribs at Judy's Rib Shack. 1. a. At equilibrium price, how many ribs would JR be willing to purchase? b. How much is JR willing to pay for 20 ribs? C How much would JR's consumer surplus be at the equilibium price? d. At the equilibrium price, how many ribs would Judy be willing to sell? e. How much must the price of ribs be for Judy to supply 20 ribs to the market? f At the equilibrium price, what is total surplus in the market? g. If the price of ribs rose to $10, what would happen to JR's consumer surplus? h If the price of ribs fell to $5, what would happen to Judy's producer surplus? j. Explain why the graph shown verifies the fact that the market equilibrium (quantity) maximizes the sum of producer and consumer surplus 13 12

Explanation / Answer

Equilibrium Price = $8, Equilibrium Quantity = 40

a. At equilibrium price, 40 ribs would JR be willing to purchase.

b. JR willing to pay for 20 ribs is $10.

c. JR’s consumer’s surplus at equilibrium price

CS = ½(Base*Height)

CS = ½ (40*4) = 80

(Area of triangle above the equilibrium price)

d. At equilibrium price, Judy will be willing to sell 40 ribs.

e. Price of ribs will be for Judy to supply 20 ribs is $10.

f. At equilibrium price total surplus is

Total Surplus = Consumer Surplus + Producer Surplus

Consumer Surplus = 80

PS = ½(Base*Height)

PS = ½ (40*6) = 120

Total Surplus = 80 + 120 = 200

g. At price $10, consumers surplus will be

CS = ½(Base*Height)

CS = ½(20*2) = 20

h. At price $5, producers surplus will be

PS = ½(Base*Height)

PS = ½ (20*3) = 30

h. If the price is fixed above or below the equilibrium price, deadweight loss will be created which indicates market inefficiencies. The market will be efficient when the demand is equal to supply. Any price set below or above the equilibrium price will be a loss to both consumers and producers. It can be seen in the above calculations that the total surplus is maximum in the equilibrium price only. When the price is less or more than the set price, the consumer and producers will suffer losses.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.