PS 1.pdf - Problem Set 1 due Sept 6 2018 in lecture section...

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Problem Set # 1 due Sept 6, 2018 in lecture section discussed Sept 7 in discussion section 1. In a market similar to the one we conducted in class, there are ten buyers and ten sellers each buying or selling one unit of the good. The values for the buyers are 10, 9, 9, 8.5, 8, 7, 6, 5.5, 4, and 3. The values for the sellers are 9.5, 9, 8.5, 8, 7, 5, 3.5, 3.5, 2.5, and 1. a) What is the total market surplus if everyone trades ? b) What is the maximum total market surplus ? c) Who should not trade to achieve your answer in b) ? d) If every trade had to be at the same price, what price would achieve your answer in b) ? e) If every trade were at the price you found in d), how many trades would occur, what would total buyer surplus be and what would total seller surplus be ? 2. Supply and demand are given by: 𝑄𝑄 𝑑𝑑 = 20 .1 𝑝𝑝 + .5 𝑝𝑝 𝑜𝑜𝑜𝑜ℎ𝑒𝑒𝑒𝑒 + .4 𝐼𝐼 𝑄𝑄 𝑠𝑠 = .15 𝑝𝑝 − 10 a) Suppose I = 100 and p other = 20, what is equilibrium price and quantity in this market ?
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Christopher Reinemann
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