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Unformatted text preview: Consumer Sur plus 20 Q 20 P 25 5 Q= 25-P Deadweight Loss BASD 505 Environmental Management, Economics, and Technology J,McPhadden, N.Golderberg er S.Shamash H.Gu 1 a) Petes Demand: Q d = 10-0.25P *2= 20-0.5P Janes Demand: Q d = 5-0.5P Aggregate Demand: Q d = (10+10)-(0.5+0.5)P= 25-P b) Q= 25-P If P= $5 then Q= 20 PQ= 25Q-Q 2 = $15,000 Consumer surplus: (20*20)/2= 200 2. a) $70 = WTP (demand), thus by setting D= MC Firm A: $70= $100+Q Q= -30 therefore do not produce Firm B: $70= $50+2Q Q= 10 b) market supply reflects private marginal costs of production MC a = 100+Q BASD 505 Environmental Management, Economics, and Technology J,McPhadden, N.Golderberg er S.Shamash H.Gu MC b = 50+2Q- Given supply of type B firms is double that of type 1, aggregate market supply is: MC agg = (100+Q)+ 2(50+2Q)= 200+5Q= 40+Q c) MC a-MC b = (100+Q)- (50+2Q)= 50- Q MC agg = 2(50+2Q)- (50-Q)= 50+5Q= 10+Q 3. a) For each plant, Q = 40 MC a = (20 + Q a )*10 = 200+400 = 600 MC b = (10 + 2Q b )*10= 100 + 20(40) = 900 Total cost for both = 600+900 = $1500 b) MC a = MC b MC a = 200 + 10Q a MC b = 100 + 20Q...
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