Microeconomics

Handout 4: Market Equilibrium, Market Efficiency and Welfare, Taxes Problem 1 Qs MC Qd MU X 0 X 2 25 23 6 21 19 10 17 12 15 14 13 16 11 18 9 10 20 10 7 a) Find the equilibrium quantity b) Find the interval in which the equilibrium price can be found c) Choose one value of the equilibrium price from the interval you found in b) and compute the consumer's surplus in the equilibrium d) Find the producer's surplus in the equilibrium for the value of the equilibrium price you chose in c) e) Compute the total social welfare in the equilibrium for the value of the equilibrium price you assumed in c) and d) f) At the equilibrium quantity you found in a), does the market reach its maximum efficiency? Explain, discuss