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Consider the market demand and supply models for good x, a drug to treat patients suffering from an ailment:
D(q) = 81 – 3.7q2
S(q) = 45 + 2.3q2
(a)Find the market equilibrium price and quantity.
(b)Find the consumer, producer, and total surpluses.
(c)Consider that the government will allow firms to raise prices and firms are permitted to charge consumers minimally $75 a dose. What will be its deadweight loss?
(d)What will be the adjusted consumer, producer, and total surpluses after the policy was enacted?
Sample Solution
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