APEC 343 Problem Set 1 - Spring 2020 Problem 1 (6 points) As an economics intern for Senator Carper, you have been asked to analyze the efficiency of the perfectly competitive market for widgets in Delaware. You calculate the functional forms of the market supply and demand functions to be: QD(PD) = 105 - PD QS ( PS ) = Ps. (a) Start by graphing the market for widgets. For full credit, label the equilibrium point as well as all axes, curves, and intercepts. (b) Right now, the market is producing 25 widgets at a price of $125 per widget. Calculate the deadweight loss at this level of production, and indicate the deadweight loss triangle on your graph. What does this deadweight loss represent? Maximum word count: 20 words! If you write more than 20 words, you will receive zero (0) points. (c) How can you make the market for widgets efficient? Where is the optimal quantity of production and price per unit? Maximum word count: 20 words! If you write more than 20 words, you will receive zero (0) points. (d) On your recommendation, Delaware widget producers now produce widgets at the price and quantity that you identified in (c). What is the deadweight loss at this point? What is the consumer and producer surplus? Maximum word count: 20 words! If you write more than 20 words, you will receive zero (0) points