Demand Is Represented by the Equation, P = 20 -

Essay

Demand is represented by the equation, P = 20 - 0.2QD and supply by the equation P = 5 + 0.1QS.(a) Suppose this market produces 40 units of output.What price would this output be sold at? What is the marginal benefit to society of the 40th unit? What is the marginal cost of the 40th unit?
(b) What is consumer surplus if the market produces 40 units of output? What is producer surplus? What is the sum of consumer and producer surplus?
(c) What are the equilibrium price and quantity?
(d) What is consumer surplus at equilibrium? What is producer surplus? What is the sum of consumer and producer surplus?
(e) Is allocative efficiency achieved when the market produces 40 units of output? Explain in three different ways.