Figure 4-4 Figure 4-4 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 4-4. What is the value of the deadweight loss at a price of $18?

Question

Figure 4-4  Figure 4-4 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 4-4. What is the value of the deadweight loss at a price of $18?

Quizplus · Accepted Answer

The deadweight loss is the triangle formed by the demand curve, the supply curve, and the price ceiling. The base of the triangle is the difference between the equilibrium quantity and the quantity supplied at the price ceiling, which is 20 units. The height of the triangle is the difference between the equilibrium price and the price ceiling, which is $2. Therefore, the area of the triangle, which represents the deadweight loss, is 1/2 * 20 * 2 = $20.

Figure 4-4 Figure 4-4 Shows the Market for Tiger