Suppose the smell from Paula and Dean’s baking is causing tummies to rumble. Th...
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Suppose the smell from Paula and Dean’s baking is causing tummies to rumble. The private market for pies is given by:
Demand: P = 36 – 2Q
Supply: P = 3 + Q
The delicious scent in the air is creating an external benefit of $6 per pie.
1. How many fewer pies are being baked than is socially optimal? 2. What is the deadweight loss associated with this underproduction? $Want instant access to all verified answers on moodle.telt.unsw.edu.au?
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