Demand Is Represented by the Equation,P = 20 - 0

question 7

Essay

Demand is represented by the equation,P = 20 - 0.2Q_D and supply by the equation P = 5 + 0.1Q_S.
(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 40^th unit? What is the marginal cost of the 40^th 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.

---

Definitions:

Pie Chart

A round chart that is separated into segments to show numerical relationships.

Omitted Variables

Factors not included in a model that could influence its outcome or the relationship between variables studied.

Reverse Causality

The error committed when the true direction of causality between two variables is reversed, and the independent variable and the dependent variable are incorrectly identified.

Features of Construction

Characteristics or aspects that pertain to the method and process of constructing buildings or infrastructure.