Question
Consider a well-functioning market for Good A, that is characterized by the following demand and supply curves: : = 260 6 : = 10 +
Consider a well-functioning market for Good A, that is characterized by the following demand and supply curves:
: = 260 6 : = 10 + 3
(a) What are the equilibrium price and quantity? Illustrate using a graph.
(b) What is the marginal social cost of the first unit?
(c) What is the net (marginal) social benefit of the first unit?
(d) What is the total social benefit in equilibrium?
(e) What is the total social cost in equilibrium?
(f) What is the net (total) social benefit in equilibrium?
(g) What proportion of the net (total) social benefit in equilibrium is enjoyed by consumers; i.e.,
what proportion goes to consumer surplus?
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