Calculate the deadweight loss associated with presence

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3) If the two functions from questions 1( MB(q)=320-18q ) and 2 ( MC(q)=20+6q ) were demand and supply functions:

(a) Plot both functions on one graph.

(b) Show (i.e., calculate algebraically, brie y showing your steps) what the equilibrium price and quantity would be.

(c) Calculate total economic surplus associated with the crude oil market and indicate how much of this surplus accrues to consumers and how much to producers

4) Suppose that crude oil extraction imposes an external cost of $84 per million barrels/day (constant marginal external cost).

(a) Plot a new graph that includes these external costs

(b) Identify the optimal quantity and market price in the presence of the external cost.

(c) Calculate the deadweight loss associated with the presence of the externality

Reference no: EM131236981

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