In a competitive market,the demand and supply curves are Q = 12 - P and Q = 5P,respectively.If output is fixed at Q = 11,what is the amount of the resulting deadweight loss?
A) 0
B) 0.6
C) 11.4
D) 15

Question

Quizplus · Accepted Answer

To find deadweight loss, we need to find the difference between the social surplus at the competitive equilibrium and the social surplus at the fixed output level. 
At the competitive equilibrium, the demand and supply curves intersect at Q=6 and P=$6. At this point, consumer surplus is (1/2)(12-6)(6) = $18 and producer surplus is (1/2)(6)(6) = $18. Thus the total social surplus is $36. 
At the fixed output level of Q=11, we need to find the market price by setting the demand curve equal to the fixed output level:  11=12-P, so P=$1. Using this price, consumer surplus is (1/2)(12-1)(11) = $60.50 and producer surplus is (1/2)(1)(11) = $5.50. Thus the total social surplus is $66. 
The difference between the total social surplus at the competitive equilibrium and the fixed output level is $66-$36 = $30. This is the deadweight loss.

In a Competitive Market,the Demand and Supply Curves Are Q