Figure 4-3

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4-3.What is the value of the deadweight loss at a price of $18?

Question

Figure 4-3
  
Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4-3.What is the value of the deadweight loss at a price of $18?

Quizplus · Accepted Answer

At a price of $18, the quantity demanded is 100 units and the quantity supplied is 200 units. The deadweight loss is the triangle formed by the difference between the equilibrium quantity and the quantity demanded or supplied at the price ceiling, multiplied by the difference between the equilibrium price and the price ceiling. In this case, the deadweight loss is (200 - 100) * (20 - 18) = $100.

Figure 4-3 Figure 4-3 Shows the Market for Tiger Shrimp. the Market