Question

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1. The demand function for Internet cameras is given by PX=60-X. The marginal cost curve is MC = 10. Assume that there is a competitive equilibrium in the market currently.

1. Find the equilibrium price and quantity in the market.
2. Calculate consumers’ surplus.
3. Calculate the producers’ surplus (profit).
4. Draw the supply and demand curve (on the same plane). On it, mark the equilibrium price and quantity, consumers’ surplus (mark the area) and producers’ surplus (mark the area).
5. Is the outcome Pareto Efficient? Explain.
6. Does the outcome maximize utility in the Bentham’s sense?

Answer 1

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