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1) At a price of $0.20, Ali would buy 5 donuts and have a consumer surplus of $1.00. If the price rose to $0.40, Ali would buy 3 donuts and have a consumer surplus of $0.30. 2) For a market of 50 bottles of spring water: the efficient quantity is 40 bottles where marginal benefit equals marginal cost; at the equilibrium price of $2, consumer surplus is $40 and producer surplus is $40; the deadweight loss from producing 50 bottles instead of the efficient 40 bottles is $5.

Author

Anh Thư Cù Hoàng

Language

EN