ADVANCED ANALYSIS Given the folowing diagrams: Q 20 bags. 02 15 bags. 03 27 bags

Question

ADVANCED ANALYSIS Given the folowing diagrams: Q 20 bags. 02 15 bags. 03 27 bags. The market equilibrium price is $70 per bag. The price at point a is $110 per bag The price at point csS1 per bag Tho ceaport dis S per bag The price a point sS55 perba Teprice a point fis$91 per bag The price at point g is S56 per bag. Apply e formula for the area of a triangle (Area ½ Baso» Height) to answer the folowing questions Efficiency loss from underproduction Efficiency loss from overproduction 0, Quantity(bags) Quantity (bags)

Explanation / Answer

a
Total Surplus=CS+PS
=0.5*(20)*(70)*2
=1400

CS=0.5*(20)*(110-70)
=400

b
0.5*2*(20-15)*(80-55)
=125

TS=1400-125
=1275
c.
0.5*2*(90-56)*(27-20)
=238
TS=1400-238
=1162

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