ECON 1050 Chapter 5: Economics-1 (1) (dragged) 3

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salmoneagle674

17 Sep 2016

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Producer surplus is the excess of the amount received from the sale of a good voer the cost of producing it. We calculate it as the price received for a good minus the minimum-supply price (marginal cost), summed over the quantity sold. On a graph, producer surplus is shown by the area below the market price and above the supply curve, summer over the quantity sold. The figure below shows the producer surplus from pizza when the market price is a pizza. The market price of a pizza is and maria is willing to produce the 50th pizza for . Maria"s surplus from the 50th pizza is the price minus the marginal cost, which is . So her producer surplus is the area of the blue triangle. At a pizza, max sells 50 pizzas. So his producer surplus is the area of the blue triangle.

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There are four buyers (Debu, Sumon, Aslam & Rakib) in the market. All of them want to buy a pizza. Debu is willing to pay 800/- taka for one pizza, Sumon is willing to pay 600/- taka for one pizza, Aslam is willing to pay 400/- taka for one pizza, and Rakib is willing to pay 200/- taka for one pizza. On the other hand, there are four pizza sellers in the market (Anup, Roni, Himel & Badal). Anup’s cost of producing one pizza is 200/- taka, Roni’s cost of producing one pizza is 400/- taka, Himel’s cost of producing one pizza is 600/- taka, and Badal’s cost of producing one pizza is 800/- taka. Based on all of this information, answer the following questions

Q1 Derive the demand schedule for pizza.

Q2 If the market price of one pizza is 450/- taka, what will be the market quantity demanded pizzas, and what will be the total consumer surplus?

Q3 If the market price of one pizza is 350/- taka, what will be the market quantity demanded pizzas, and what will be the total consumer surplus?

Q4 Derive the supply schedule for pizza.

Q5 If the market price of one pizza is 500/- taka, what will be the market quantity supplied for pizzas, and what will be the total producer surplus?

Q6 If the market price of one pizza is 900/- taka, what will be the market quantity supplied for pizzas, and what will be the total producer surplus?

Q7 Now, considering the demand and supply side of this pizza market, calculate the market quantity demanded and quantity supplied at 100/-, 300/- and 500/- taka. Which of these prices brings supply and demand into equilibrium?

Q8 What are the entire consumer surplus & producer surplus, and total surplus in this equilibrium?

pearporpoise596

At the current market equilibrium, the price of a good equals $40, and the quantity equals 10 units. At this equilibrium, the price elasticity of supply is 2.0. Assume that the supply curve is linear.

a. Use the price elasticity and market equilibrium to find the supply curve (Hint: the supply curve has the following form: q = a + (dq/dp)p. First, find the value of dq/dp; then, find the value of a.

b. Calculate the producer surplus in the market.

c. Imagine that a policy results in the price falling from $40 to $30. By how much does producer surplus fall?

d. What fraction of the lost producer surplus is due to the reduction in the quantity supplied, and what fraction is due to the fall in price received per unit sold?

scarlethyena149

1. Consumer surplus is not

a. the value of a good minus the price paid for it, summed over the quantity bought.

b. greater on the first unit sold than on the last unit sold.

c. greater on the last unit sold than on the first unit sold.

d. equal to the area below the demand curve and above the market price line.

2. The demand curve for hamburgers is the same as the

a. marginal benefit curve for hamburgers.

b. marginal cost curve of hamburgers.

c. consumer surplus curve of hamburgers.

d. All of the above.

3. A supply curve is

a. the same as a production possibilities frontier.

b. a marginal social benefit curve.

c. a marginal benefit curve.

d. a marginal cost curve.

e. a downward-sloping curve.

4. The opportunity cost of producing one more hot dog is $1.00. The price of a hot dog is $1.50. The producer surplus from selling one more hot dog is

a. $1.00

b. $1.50

c. $0.50

d. zero.

e. $2.50

5. Markets may not achieve an efficient allocation of resources when there are

a. external costs.

b. monopolies.

c. taxes.

d. all of the above.

ECON 1050 Chapter 5: Economics-1 (1) (dragged) 3

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