Problem 2. Suppose the true value of vitamin C for consumers is $10/bottle. Of the 150 consumers, 100 underestimate the value per bottle by $5, 10 overestimate it by $2, and others correctly estimate the value. Suppliers are willing to supply any quantity demanded at $7/bottle. (a) Draw the supply, demand, and value curves (i.e., true consumer values). (b) Calculate the consumer surplus before the government informs consumers of their mistakes. (c) Show the area of consumer surplus after the government informs consumers of their mistakes.

Problem 2. Suppose the true value of vitamin C for consumers is $10/bottle. Of the 150 consumers, 100 underestimate the value per bottle by $5, 10 overestimate it by $2, and others correctly estimate the value. Suppliers are willing to supply any quantity demanded at $7/bottle. (a) Draw the supply, demand, and value curves (i.e., true consumer values). (b) Calculate the consumer surplus before the government informs consumers of their mistakes. (c) Show the area of consumer surplus after the government informs consumers of their mistakes.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 20CTQ: A website offers a place for people to buy and sell emeralds, but information about emeralds can be...

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