Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 6

Suppose the government imposes a price floor of $1.40 in the market for bottled water in problem 1. Calculate the dollar value of each of the following:
a. Market consumer surplus
b. Market producer surplus
c. Total benefits in the market
d. The deadweight loss from the price floor
Problem 1
The following table shows the quantities of bottled water demanded and supplied per week at different prices in a particular city:
a. Draw the supply and demand curves for this market,and identify the equilibrium price and quantity.
b. Identify on your graph areas for market consumer surplus and market producer surplus when the market is in equilibrium.
c. Using your graph,calculate the dollar value of market consumer surplus,market producer surplus,and the total net benefits in the market at equilibrium.
Calculate the deadweight loss caused by the monopolization of the wheat industry in Figure 1. (Note: For marginal revenue at 300,000 bushels,use $2.)Figure 1 The Deadweight Loss from Monopoly