oday 618 PM Review Homework Chapter 4 Score 0 of 6 pts HW Sc

oday 6:18 PM Review Homework: Chapter 4 Score: 0 of 6 pts HW Score: 94% 130f 17 Text Problem 3.1 Use the diagram on the right to answer the following questions: (round all numerical responses to two decimal places) Consumer surplus at a price of $12 and production of 500 thousand fu For the same equilibrium, total producer surplus is $ 1.65 million Assuming price remained at $12 but production was cut to 200 thousand vaccinations per day, producer surplus is now $ 1.06 million and consumer surplus is $21 million. loss is $ 1.8 milion. 100 200 300 400 500 600 700 80o s00 1 Thousands of

Solution

Consumer surplus at a price of $12 and production of 500 thousand vaccination per day =

0.5(25-12)*500,000= $3.250million

Producer surplus: - 0.5*(12-5.4)*500000=$1.65 million

At 200 thousand:-

Producer surplus: - 0.5*(8-5.4)*200000 + (12-8)*200000=260000+800000=$1.06 million

Consumer surplus :- 0.5(25-20)*200,000 + (20-12)*200,000= 500000++1600000= $2.1million

Deadweight loss :- 0.5*(20-12)*(500,000-200,000) + 0.5*(12-8)*(500,000-200,000) =1200000+600000=$1.8 million

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