The figure above shows the market for pizza.
-In the figure above,if pizza production increases to 15,000 pizzas a day,the deadweight loss is
A) $45,000 per day.
B) $12,500 per day.
C) $22,500 per day.
D) $90,000 per day.
E) zero.

Question

The figure above shows the market for pizza.
-In the figure above,if pizza production increases to 15,000 pizzas a day,the deadweight loss is
A) $45,000 per day. 
B) $12,500 per day. 
C) $22,500 per day. 
D) $90,000 per day. 
E) zero.

Quizplus · Accepted Answer

When production increases to 15,000 pizzas a day, the new equilibrium price will be $10 and the quantity demanded will be 11,000 pizzas a day. The new consumer surplus is ($10 - $8) x 11,000 / 2 = $11,000. The new producer surplus is ($10 - $3) x 15,000 / 2 = $52,500. So the total surplus is $11,000 + $52,500 = $63,500. 
When the production was at 10,000 pizzas per day, the total surplus was ($8 - $3) x 10,000 / 2 = $25,000. Therefore, the deadweight loss is the difference between the two surpluses, which is $63,500 - $25,000 = $38,500 per day or $22,500 over the 5-day work week. Therefore, the correct answer is C.

The Figure Above Shows the Market for Pizza