Ch. 7 Efficiency And Exchange

Chapter 7 Problem Solutions 1. Analyzing the market for DVDs in Lincoln, Nebraska: a. Consumer horn of plenty is the triangular area between the exact curve and the counterbalance 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 unornamented is 0.5($1.50/unit)(6 units/week) = $4.50 per week. b. Producer surplus is the triangular area between the remainder legal injury and the tot curve. Using the base-height formula, it is (0.5)($4.50/unit)(6 units/week) = $13.50 per week. c. The maximum periodical totality that consumers and producers together would be willing to pay to make out in utilize 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 charge ceiling the market for DVDs: a. At a price of $7.50, the meter supplied per week = 2. The quanti ty demanded at this price is 18 per week, which implies a each week shortage of 16 used DVDs. b. The weekly economic surplus lost as a pass on 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 disposed 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 reservation price for the stay. 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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