Refer to the figure. What is the deadweight loss in this figure at the market eq
ID: 1223485 • Letter: R
Question
Refer to the figure. What is the deadweight loss in this figure at the market equilibrium? 1) $25.00 2) $4.00 3) $8.33 4) $11.25 If there are 100 tickets to a concert and 200 fans that would like to go to the concert each placing a slightly different value on the tickets, is it more efficient to hold an auction for the tickets or to hold a random drawing for the tickets? 1) Hold an auction 2) Hold a random drawing 3) Both are equally efficient. 4) It is impossible to say which is more efficient.Explanation / Answer
27. Deadweight loss is the consumer/producer surplus decrease without the surplus going to either of the two. The DWL is the area of triangle joining the points, $3 - $7 (both with quantity 3 units) and point $5 (with quantity 5 units).
Area of triangle = 1/2*base*height.
DWL = 1/2*(7-3)*(5-3)
DWL = $4.
Hence option B is correct.
28. Option A is correct.
When the willingness to pay for the concert ticket is different for different consumers, the better option is to hold a an auction so that those who place a high willingness to pay can get the tickets. Also the supply of tickets is less than the demand. There would be an excess demand for tickets. So holding an auction is a better solution.