a. At the equilibrium price, calculate total surplus in the market. b. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. Calculate the increase in producer surplus for the producers already in the market and to the new producers who will enter the market due to this increase in price. c. Is the equilibrium point efficient and why? Explain also what is happing to the total surplus in the market at this point? d. Is it efficient for producers to produce 110 units of the good and why? Explain e. What will happen to total surplus in the market if 110 units are produced? f. If other point different from the equilibrium is selected, explain what will happen to the total surplus in the market and how to keep total surplus maximized.

a. At the equilibrium price, calculate total surplus in the market. b. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. Calculate the increase in producer surplus for the producers already in the market and to the new producers who will enter the market due to this increase in price. c. Is the equilibrium point efficient and why? Explain also what is happing to the total surplus in the market at this point? d. Is it efficient for producers to produce 110 units of the good and why? Explain e. What will happen to total surplus in the market if 110 units are produced? f. If other point different from the equilibrium is selected, explain what will happen to the total surplus in the market and how to keep total surplus maximized.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section: Chapter Questions

Problem 20AA

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