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Problem 1: Economic Surplus Consider the monthly exchange in the market for chocolate chip cookies, as...

Problem 1: Economic Surplus Consider the monthly exchange in the market for chocolate chip cookies, as described by the following demand and supply equations. Note that the prices are in dollars per box of cookies and the quantities are in hundreds of boxes. Assume that the market for cookies is perfectly competitive. Demand: P = 12 − 0.5QD and Supply P = 3 + Qs

A. Calculate the equilibrium quantity of exchange and the market clearing price. (Show all your work - no marks will be awarded without accompanying work)

B. Draw the market. Label the demand and supply curves and the numerical values of the market clearing price and equilibrium quantity exchanged that you calculated in part A. (Use a ruler) C. Calculate the dollar-value of consumer surplus generated by the market when it is in equilibrium AND clearly label the area on your graph that represents this amount. (Show all your work - no marks will be awarded without accompanying work)

D. Calculate the dollar-value of producer surplus generated by the market when it is in equilibrium AND clearly label the area on your graph that represents this amount. (Show all your work - no marks will be awarded without accompanying work)

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