1. Firms sometimes hide negative effects of a product from the consumer, thereby creating a biased demand curve and a market result that is both inefficient and unfair. In the sexy cigarette market, consumers think the total value of the product is consistent with demand D2, but they have been fooled. The true value of the product is seen in demand curve D1:

True demand is P = 160 - 2Q

Perceived demand is P = 175 - 2Q

Supply is P = 10 + Q

1. Find the price, quantity, and the dollar values of the consumer and producer surplus in a market with perfect information (true demand). Also find the net gains.
2. Now find the price, quantity, along with the dollar values of the consumer and producer surplus and the deadweight loss when the consumers are being fooled.