Ch. 7 Efficiency And Exchange

Chapter 7 Problem Solutions 1. Analyzing the market for DVDs in Lincoln, Nebraska: a. Consumer overplus is the triangular area between the exact curve and the proportion footing. Its area is equal to 0.5bh, where b is the base of the triangle and h is the height. The base is 6 units and the height is 1.5 units, measured in dollars. Therefore, consumer evident is 0.5($1.50/unit)(6 units/week) = $4.50 per week. b. Producer surplus is the triangular area between the equilibrium legal injury and the picture curve. Using the base-height formula, it is (0.5)($4.50/unit)(6 units/week) = $13.50 per week. c. The maximum periodic totality that consumers and producers together would be willing to pay to care in utilise DVDs is the sum of gains from trading in used DVDsnamely, the total scotch surplus generated per week, which is $18 per week. 2. Effects of a footing ceiling the market for DVDs: a. At a price of $7.50, the meter supplied per week = 2. The quantity demanded at this price is 18 per week, which implies a weekly shortage of 16 used DVDs. b. The weekly economic surplus lost as a termination of the price ceiling is the area of the dark-shaded triangle in the supply and demand diagram below, i.e. the sum of the areas of the two triangles ABC and ACD in the much detailed diagram that is circled.

Using the information condition in the graph, this amount is calculated as (0.5)($1/unit)(4 units per week) + (0.5)($3/unit)(4 units per week) = $8 per week. 3. First-come, first-served versus soliciting volunteers: a. When there is no charge for the crook, the surplus enjoyed by mortal who takes it equals his or her reserv! ation price for the turn. If the warden operates the tour on a first-come-first served basis, Herman, Jon, Kate and Jack will get to take the tour and their feature consumer surplus is $20 + $14 + $30 + $15 = $79. b. An cristal of $15 compensation generates 3 volunteers to return some other sidereal day: Fran, Jack and Jon. The four people who go on the tour (Penny, Kate, 1 Chapter...If you want to get a full essay, order it on our website: BestEssayCheap.com

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