1. Consider an industry with a supply function given by Q =300 + 15P .

 

The market demand function is given by P = $25

(a) Draw a diagram that shows producer surplus and variable cost at the

equilibrium point. (make sure to indicate equilibrium quantity).

(b) Compute the producer surplus and variable cost of the industry at

the equilibrium point.

(c) What’s the consumer surplus at the equilibrium price? Why?

(d) What effect on consumer and producer surplus (welfare) would a

government total market production limit of q=50 have?

Answer rating: 100% (QA)

a To find the equilibrium price and quantity we set the supply function eq... View the full answer