b) Redraw the graph, but this time shade in the areas that represent consumer surplus, producer surplus, and deadweight loss. Calculate the numerical values of each. Is this the maximum amount of welfare that this market could possibly generate? If not, how far does it fall short. c) If congress regulated the price of 3D food printers with the goal of maximizing society's total surplus/welfare, what price should it choose? Show that price in your diagram, the corresponding quantity that your firm would provide, and explain why this price is efficient using the concepts of marginal cost and marginal benefit. d) Suppose instead that the government pays some of your firm's fixed costs, such that F = $4,500,000, but requires in return that you must charge the price which earns your firm the perfectly competitive long-run equilibrium level of economic profits. What price would the government require you to charge? How would the markup with this price compare to the markup under the monopolist's price? Would the quantity that corresponds to this price be higher, lower, or the same as the efficient quantity found in part (c)?
b) Redraw the graph, but this time shade in the areas that represent consumer surplus, producer surplus, and deadweight loss. Calculate the numerical values of each. Is this the maximum amount of welfare that this market could possibly generate? If not, how far does it fall short. c) If congress regulated the price of 3D food printers with the goal of maximizing society's total surplus/welfare, what price should it choose? Show that price in your diagram, the corresponding quantity that your firm would provide, and explain why this price is efficient using the concepts of marginal cost and marginal benefit. d) Suppose instead that the government pays some of your firm's fixed costs, such that F = $4,500,000, but requires in return that you must charge the price which earns your firm the perfectly competitive long-run equilibrium level of economic profits. What price would the government require you to charge? How would the markup with this price compare to the markup under the monopolist's price? Would the quantity that corresponds to this price be higher, lower, or the same as the efficient quantity found in part (c)?
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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VIEWStep 2: Determine consumer surplus, producer surplus and deadweight loss:
VIEWStep 3: Determine the price and quantity if the firm is regulated:
VIEWStep 4: Determine the price and quantity and markup when government subsidized some of fixed cost:
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