Scenario: Vacant houses, foreclosed or abandoned, are typically boarded up with plywood that many people consider unsightly and likely to invite vandalism. An alternative is clear plastic (polycarbonate) panels. The figure below shows the demand and the supply of polycarbonate panels used for boarding up houses in a hypothetical town. To answer some of the questions below, it will be useful to find the equations of the three lines in the figure.

-Refer to the scenario above.The deadweight loss associated with ignoring external benefits is ________.Use the equations of the demand and the supply curves.

Question

Scenario: Vacant houses, foreclosed or abandoned, are typically boarded up with plywood that many people consider unsightly and likely to invite vandalism. An alternative is clear plastic (polycarbonate) panels. The figure below shows the demand and the supply of polycarbonate panels used for boarding up houses in a hypothetical town. To answer some of the questions below, it will be useful to find the equations of the three lines in the figure.
 
-Refer to the scenario above.The deadweight loss associated with ignoring external benefits is ________.Use the equations of the demand and the supply curves.

Quizplus · Accepted Answer

The deadweight loss is calculated by finding the area of the triangle formed between the social demand curve and the private demand curve at the equilibrium quantity. Given the options, $900 is the correct calculation for this area.

Scenario: Vacant Houses, Foreclosed or Abandoned, Are Typically Boarded Up