The figure above shows the market for pizza
a) If the price of a slice of pizza is $3, what is the consumer surplus of the 50th slice?
b) If the price of a slice of pizza is $3, what is the producer surplus of the 50th slice?
c) What is the efficient quantity? What is the equilibrium quantity? What is the deadweight loss when the equilibrium quantity is produced?
a) Consumer surplus is the distance between the demand curve and the price of $3 when 50 slices are consumed. That difference is $4, the marginal social benefit, minus $3 or $1.
b) Producer surplus is the distance between the supply curve and the market price when 50 slices are produced. That difference is $3 minus $2, the marginal social cost, or $1.
c) The efficient quantity is 100 slices because that is the quantity for which the marginal social benefit equals the marginal social cost. The equilibrium quantity is 100 slices, because that is the quantity for which the quantity demanded equals the quantity supplied. There is no deadweight loss at the equilibrium quantity because it is the same as the efficient quantity.
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