UNC ECON 3125 – Example 4 Assume a demand
Example #4Assume a demand of Q = 200 – 5PAssume this market is served by a competitive market.MC = AC = $10.a. Calculate the consumer surplus.b. Calculate the producer surplus a. To get the price intercept, rearrangeP = 40 – 1/5QIntercept is 40 To get Q, set Price = MCMC = 10Q = 200 – 5(10)Q = 200 – 50Q = 150 Area of a triangle:½ x Base x Height½ x 150 x (40 – 10)½ x 150 x 30Consumer Surplus = 2,250b. Price is equal to Marginal Cost. Marginal cost curve is essentially the supply curve.So Producer Surplus = 0. 4. Assume a demand of Q = 800 – 2PAssume this market is served by a monopoly.MC = AC = $20.a. Calculate the consumer surplus.b. Calculate the producer surplus.c. Calculate the deadweight loss.
