6. Use the demand schedule for diamonds given in Problem 5. The manginal cost of producing...

Transcribed Image Text:

6. Use the demand schedule for diamonds given in Problem 5. The manginal cost of producing diamonds is constant at $100. There is no fixed cost. a. If De Beers charges the monopoly price, how large is the individual consumer sur- plus that each buyer experiences? Calculate total consume surplus by summing the individual consumer surpluses. How large is producer surplus? Suppose that upstart Russian and Asian producers enter the market and it becomes perfectly competitive. b. What is the perfectly competitive price? What quantity will be sold in this perfectly competitive market? . At the compectitive price and quantity, how large is the consumer surplus that cach buyer experiences? How large is total consumer surplus? How large is producer surplus? d. Compare your answer to part e to your answer to part a. How large is the dead- weight loss associated with monopoly in this case? Price of diamond Quantity of diamonds demanded $500 400 1 300 2 200 3 100 4. 6. Use the demand schedule for diamonds given in Problem 5. The manginal cost of producing diamonds is constant at $100. There is no fixed cost. a. If De Beers charges the monopoly price, how large is the individual consumer sur- plus that each buyer experiences? Calculate total consume surplus by summing the individual consumer surpluses. How large is producer surplus? Suppose that upstart Russian and Asian producers enter the market and it becomes perfectly competitive. b. What is the perfectly competitive price? What quantity will be sold in this perfectly competitive market? . At the compectitive price and quantity, how large is the consumer surplus that cach buyer experiences? How large is total consumer surplus? How large is producer surplus? d. Compare your answer to part e to your answer to part a. How large is the dead- weight loss associated with monopoly in this case? Price of diamond Quantity of diamonds demanded $500 400 1 300 2 200 3 100 4.

Answer rating: 100% (QA)

a At P 300 the diamonds sold are 2 diamonds Consumer surplus of Raquel Willingness to pay Pr... View the full answer