ECON361 Study Guide - Quiz Guide: Opportunity Cost, Marginal Cost, Deadweight Loss
8 Aug 2016
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Econ 361 online problem set two answers. This document articulates answers to questions in problem set one: answers, the net cost to society is the deadweight loss caused by the increased toll and the resulting fall in the number of cars using the highway. The value of this deadweight loss is (. 5)(. 50-. 40)(50,000-40,000) = . This loss can be computed as the triangular area above the supply curve and between the old and the new quantities purchased by the government. Consequently, the size of the annual loss to producers of concrete is (. 5)(-. 50)(1,000) = . Thus, the social value of the savings that results from the government using less concrete is ,000 - = ,750. Note that the government, as well as non-government buyers of concrete, also receive gains from the 50 cent reduction in the price of concrete. However, these gains are more than offset by reductions in the surplus of the producers of concrete.
