Answer to Question #132748 in Microeconomics for Farah tabinda

Question

1. A good can be produced in a competitive industry at a cost of $10 per unit. There are 100 consumers are each willing to pay $12 each to consume a single unit of the good (additional units have no value to them.) What is the equilibrium price and quantity sold? The government imposes a tax of $1 on the good. What is the deadweight loss of this tax?
2. Suppose that the demand curve is given by D(p) = 10 − p. What is the gross benefit from consuming 6 units of the good?
3. In the above example, if the price changes from 4 to 6, what is the change in consumer’s surplus?
4. Suppose that a consumer is consuming 10 units of a discrete good and the price increases from $5 per unit to $6. However, after the price change the consumer continues to consume 10 units of the discrete good. What is the loss in the consumer’s surplus from this price change?

Answer 1

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