Suppose that the following figure depicts a perfectly competitive market. a. Wha

Question

Suppose that the following figure depicts a perfectly competitive market. a. What are the equilibrium price and quantity and at equilibrium what is the value of the producer surplus, the consumer surplus and the economic surplus? Price: S_quantity:_producer surplus: S_consumer surplus:$_economic surplus: $_b. What would be the monopolist's price, quantity, producer surplus, consumer surplus, economic surplus and deadweight loss? Price: $_quantity:_producer surplus: S_consumer surplus: S_economic surplus: $_deadweight loss: S_

Explanation / Answer

a. Price = 10

Quantity = 6

Consumer Surplus = 1/2(16-10)*6 = 18

Producer Surplus = 1/2(10 - 4)*6 = 18

Economic Surplus = Consumer + Producer Surplus = 18 + 18 = 36

b.

Price = 12

Quantity = 4

Consumer Surplus = 1/2(16-12)*4 = 8

Producer Surplus = 1/2(8- 4)*4 + (12 - 8)*4 = 8 + 16 = 24

Economic Surplus = Consumer + Producer Surplus = 8 + 24 = 32

Dead Weight Loss = Economic surplus in case of competion - Economic surplus in case of monopoly

= 36 - 32 = 4

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