Problem:
Broomsticks are manufactured by 2 firms which constitute a competitive industry. Neither firm has any fixed costs. There are two consumers, Jack and Enis. Consider the following information.
Total Cost Total Value
Quantity Firm BB Firm MT Jack Enis
1 $ 2 $ 10 $10 $37
2 3 19 7 5
3 4 26 6 4
4 5 32 2 1
Question 1. What quantity of broomsticks are sold and at what price? How many are produced by firm BB and how many by firm MT? How many are bought by Jack ? How many bought by Enis ?
Question 2. In numbers, how much producers’ surplus is gained in this market? How much consumers’ surplus ? How much social surplus ?
Question 3. Suppose BB and MT form a single (noncompetitive) firm, and that this does not affect costs. How many broomsticks are sold, and at what price ?
Question 4. In numbers, what is the size of the deadweight loss from the above action ?
Question 5. You should provide a graph that demonstrates your answers.