Paper instructions:

Q1: (6 pts) Part A: Efficient-Allocation (Q = 12, P = $5) (2 pts) Identify the area for consumer surplus (CS) under equilibrium: Price Answer: Supply $7 B (Hint: To identify an area, use the letters associated with the corner points of the area.) (2 pts) Identify the area for producer surplus (PS) under equilibrium: $6 C $5 DV $4 E Answer: $3 F (2 pts) Identify the area for social surplus (i.e., CS + PS) under equilibrium: Demand 10 Answer: 12 14 16 Quantity (10 pts) Part B: Under-Allocation (Q = 8, but the price is still $5) (2 pts) Identify the area for CS when Q = 8 (and P = 5): Answer: (2 pts) Identify the area for PS when Q = 8 (and P = 5): Answer: (2 pts) Identify the area for social surplus when Q = 8 (and P = 5): Answer: (2 pts) Identify the area for deadweight loss when Q = 8 (and P =5): Answer: (2 pts) Compute the dollar value of the deadweight loss above: Answer: $ (10 pts) Part C: Over-Allocation (Q=14, but the price is still $5) (2 pts) Identify the area for Cs when Q = 14 (and P = 5): Answer: AZD – (2 pts) Identify the area for PS when Q = 14 (and P =5): Answer: GZD – (2 pts) Identify the area for social surplus when Q = 14 (and P = 5): Answer: AZG – (2 pts) Identify the area for deadweight loss when Q = 14 (and P =5): Answer: (2 pts) Compute the dollar value of the deadweight loss above: Answer: $

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