Question

Suppose that the demand curve of the only customer in an amusement park is Qd = 200 - P.

The park charges an admission fee of Php 100, while each ride costs Php 9.

Answer the following questions:

1. Determine the supply curve of the amusement park

2. Determine the producer surplus without distortions in the market

3. Determine the consumer surplus without distortions in the market

4. What is the price at which deadweight loss is minimized?

5. At which quantity does it occur (in rides)?

6. If the government wishes to limit the number of rides per person to at most 5 per person, calculate the loss in economic efficiency.

Answer 1