The Onondaga County Resource Recovery (OCRRA) system assumed responsibility for solid waste management on November 1, 1990, for thirty-three of the thirty-five municipalities in Onondaga County, New York. OCRRA is a non-profit public benefit corporation similar to the New York State Thruway Authority. It is not an arm of county government. Its Board of Directors is comprised of volunteers who develop programs and policies for the management of solid waste. The OCRRA Board is responsible for adopting a budget that ensures there will be sufficient revenues to cover expenditures. It does not rely on county taxes. OCRRA has implemented an aggressive series of programs promoting waste reduction and recycling where markets exist to create new products. While a number of communities struggle to surpass the 20% recycling mark, Onondaga County's households and commercial outlets currently recycle more than 67% of the waste that once was buried in landfills. Converting non-recyclable waste into energy (electricity) is also a top priority.
To show the deadweight loss from monopoly problem, assume that monthly OCRRA’s market supply and demand conditions are:
QS = -2,000,000 + 10,000P(Market Supply)
QD = 1,750,000 - 5,000P(Market Demand)
Where Q is the number of customers served, and P is the market price of annual trash hauling and recycling service.
A. Graph and calculate the equilibrium price/output solution. How much consumer surplus, producer surplus, and social welfare are produced at this activity level?
B. Use the graph to help you determine the deadweight loss for consumers and the producer if the market is run by unregulated profit-maximizing monopoly. (Note: If monopoly market demand is P = $350 - $0.0002Q, then the monopolist’s MR = $350 - $0.0004Q.)