Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The market for bagels in Philadelphia is perfectly competitive. In Philadelphia, the daily demand for bagels is Qa = 15,000 - 5,000P, which is graphed

image text in transcribed
The market for bagels in Philadelphia is perfectly competitive. In Philadelphia, the daily demand for bagels is Qa = 15,000 - 5,000P, which is graphed as D in the figure below. The industry supply of bagels in Philadelphia is Os = -6,000 + 10,000P, which is graphed as S in the figure. 3.00 Price of bagels (dollars) 2.00 S 1.00 0.60 D 5,000 10,000 15,000 Quantity of bagels (per day) a. What is the market-clearing price of bagels in competitive equilibrium? How many bagels are bought and sold daily in Philadelphia? (You can solve mathematically using the equations for demand and supply, or you can use the demand and supply lines in the figure, which are drawn precisely to scale.) b. Explain why the Philadelphia bagel market is expected to achieve productive efficiency in competitive equilibrium. c. Suppose that Philadelphia bagel businesses charged a price of $2.60 and sold 2,000 bagels per day. Explain carefully why society would benefit from an increase in bagel production. d. Suppose that Philadelphia bagel businesses produced 10,000 bagels per day and charged a price of $1.60. Explain carefully why society would benefit from a decrease in bagel production. e. How does the market-clearing price found in part a serve to ration bagels to the consumers who place the highest value on them? f. Does the Philadelphia bagel market achieve social economic efficiency? Why

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Economics

Authors: N. Gregory Mankiw

5th Edition

0324590024, 9780324590029

More Books

Students also viewed these Economics questions

Question

Mortality rate

Answered: 1 week ago

Question

Armed conflicts.

Answered: 1 week ago