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5.2 In a large economics class of 450 students, each student would buy either one copy of the textbook or would not buy it. Students

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5.2 In a large economics class of 450 students, each student would buy either one copy of the textbook or would not buy it. Students with different reservation prices for the textbook can be grouped as below: GROUP RESERVATION PRICE (5) NUMBER OF STUDENTS IN THE GROUP A 550 40 B 500 50 C 450 60 D 400 60 E 350 60 F 300 80 G 250 40 H 200 40 There are also a few sellers who are willing to sell the textbook at or above the following prices. The sellers are price takers. SELLER RESERVATION PRICE ($) NUMBER OF COPIES IT SELLS I 250 100 II 300 100 III 350 70 IV 400 80 V 450 100 7 (a) What are the possible factors that would affect each student's reservation price? (b) What are the equilibrium price and quantity of the textbook? (c) What are the consumer surplus and producer surplus in this equilibrium? (d) To encourage students to buy the textbook, a subsidy of $100 is given to the students who buy the textbook. What are the equilibrium price and quantity after the subsidy is given? (Note: the market price is the price paid by students including the subsidy.) (e) Following part (d), if there are no other factors affecting social marginal costs and benets. is there any deadweight loss? If so, how much is the deadweight loss

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