FRE/ECON374
Problem set 1
Due: 4 PM, Friday, September 23rd, 2005
Instructions: a) Your grade on this problem set will be determined by
randomly
grading a
single problem from the set below.
It is thus important to do each question carefully as
any one problem could determine your grade.
b) Problem sets are to be handed in at the
beginning of class. Please do not upload your problem sets in webct. c) Any problem set
received after the time it is due will not be graded. d) Please label and mark all graphs
clearly.
1.
A little village wants to invest in an aqueduct system. The aggregate inverse
demand from the villagers is p = 20 – 2Q. The total cost of the system is defined
by the following equation: TC = 5Q + 1/2Q
2
.
a)
Show graphically the equilibrium price and quantity. Identify the
consumer and producer surpluses.
b)
Compute the consumer and producer surpluses. What is the social surplus
generated by the new system?
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '10
 varies
 Supply And Demand, inverse demand, aggregate inverse demand, social surplus

Click to edit the document details