Perfect competition and economic efficiency

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Perfect competition and economic efficiency. The market demand curve for widgets is P = 30 – Q while the market supply curve is P = Q.

1. What is the equilibrium price and quantity in the widget market under perfect competition?

2. What is the economically efficient level of widget production in this economy?

3. Calculate WTP, total cost, and social net benefits at the economically efficient level of widget production.

4. Calculate consumer and producer surplus at the efficient level of widget production. (Note that these concepts are ultimately useful in identifying the distributional consequences of public policy, although we are not explicitly doing that here.)

5. What is the relation between your estimate of social net benefits in Q1and consumer and producer surplus in Q2?

Reference no: EM13887805

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