Figures 5.4a and 5.4b . Q 1 5 20 bags. Q 2 5 15 bags. Q 3 5 27 bags. The market

Question

Figures 5.4a and 5.4b . Q 1 5 20 bags. Q 2 5 15 bags. Q 3 5 27
bags. The market equilibrium price is $45 per bag. The
price at a is $85 per bag. The price at c is $5 per bag. The
price at f is $59 per bag. The price at g is $31 per bag. Apply
the formula for the area of a triangle (Area 5 ½ 3 Base 3
Height) to answer the following questions. LO2
a. What is the dollar value of the total surplus (producer surplus
plus consumer surplus) when the allocatively efficient
output level is being produced? How large 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 Q 2 is being produced? What is the total surplus
when output level Q 2 is being produced?
c. What is the dollar value of the deadweight loss when
output level Q 3 is produced? What is the dollar value of
the total surplus when output level Q 3 is produced?

Explanation / Answer

Q 1 5 20 bags. Q 2 5 15 bags. Q 3 5 27
bags. The market equilibrium price is $45 per bag. The
price at a is $85 per bag. The price at c is $5 per bag. The
price at f is $59 per bag. The price at g is $31 per bag. Apply
the formula for the area of a triangle (Area 5 ½ 3 Base 3
Height) to answer the following questions. LO2

PS= 1/2 (85-45)(27-20)=140

CS= 1/2 (45-5)(20-15)=100

TS=100 +140=240

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