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Gobbet7a_and_solution_Problem_Set

Gobbet7a_and_solution_Problem_Set - Gobbet#7 Market...

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Gobbet #7: Market Efficiency (These problems are adapted from Callan and Thomas: Environmental Economics and Management , 2004) Consider the supply and demand schedules and the graph from Gobbet #4: PRICE (P) Quantity Demanded by Consumers (bottles/month) Quantity Supplied by Producers (bottles/month) \$0.50 1,100 100 1.00 1,050 300 1.50 1,000 500 2.00 950 700 2.50 900 900 3.00 850 1,100 3.50 800 1,300 4.00 750 1,500 4.50 700 1,700 5.00 650 1,900 Calculate the following in this market: (total) consumer benefits, total costs to the produce consumer surplus producer surplus and net economic surplus 11.50 1,150 Demand= MB Quantity Price Supply = MC 0.25 2.50 900

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Gobbet #6: Market Efficiency: Solution (These problems are adapted from Callan and Thomas: Environmental Economics and Management , 2004) Consider the supply and demand schedules and the graph from Gobbet #4: PRICE (P) Quantity Demanded by Consumers (bottles/month) Quantity Supplied by Producers (bottles/month) \$0.50 1,100 100 1.00 1,050 300 1.50 1,000 500 2.00 950 700 2.50 900 900 3.00 850 1,100 3.50 800 1,300 4.00 750 1,500 4.50 700 1,700 5.00 650 1,900 Calculate the following in this market: (total) consumer benefits or value, total costs of production consumer surplus producer surplus and net economic surplus 11.50 1,150 Demand= MB Quantity Price Supply = MC 0.25 2.50 900
Solution: When answering such questions, it is always helpful to go back to basic definitions and understand the concepts, then translate these concepts to graphical areas, and then calculate the areas.

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