Short/Long Exercises 11. Suppose that the market demand curve is p = 30 ? 2 x an

Question

Short/Long Exercises

11. Suppose that the market demand curve is p = 30 ? 2x and the market supply curve is p = x.

(a) Calculate the equilibrium price and output level.

(b) Suppose a price ceiling of 6 is imposed. What is the new equilibrium quantity transacted in the market?

(c) How does the price consumers pay (including any marginal effort costs) compare to the price firms receive?

(d) What is the total cost of the additional effort exerted by consumers?

12. Suppose a single firm has constant marginal cost and faced the demand curve

(a) Illustrate in this graph how a monopolist who cannot price discriminate would price this good. What is the monopoly price and quantity?

(b) Assuming no recurring fixed costs, how much profit does the monopolist make? How much consumer surplus is generated?

Explanation / Answer

answer 11

a) demand =supply

30-2X=X

30=3X

X=10

eq price= 10

equilibrium quantity =10 units

b) price ceiling=6

p=30-2*6

=18

equilibrium price and quantity =18

c) price that consumers pay including the cost of efforts is more than what firms receive

d) total cost= P*Q

+marginal efforts cost

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