Question

The Ministry of Tourism in the Republic of Palau estimates that the demand for its scuba diving

tours is given by Q D =6,000 – 20P, where Q is the number of divers served each month and P is

the price of a two-tank dive. The supply of scuba diving tours is given by Q S = 30P – 2,000.

a. Solve for the equilibrium price and quantity.

b. Find the value of the consumer surplus received by divers visiting Palau. (Hint: It may help to draw

a graph.)

c. Find the value of producer surplus received by dive shops. (Hint: It may help to draw a graph.)

Answer 1