Answer:
(a) The equilibrium quantity is Q* = 6 (b) The quantity supplied by private sellers is Q* = 0 (c) The new new equilibrium price is $9, the new equilibrium quantity is = 5 bags, and the bags were oranges were over produced is Q* = 1
Explanation:
Solution
(a) When the equilibrium price is at $8, the the quantity of equilibrium is stated as:
From the data given, when the price at equilibrium is $8, then the six consumers namely, bob, barb, bill, brat, Brent, Betty were all willingly to pay much more than the equilibrium price and the 6 producers namely, Carlos, Courtney, chuck, Cindy, Craig, chad accepted, because the price at equilibrium is greater than the minimum accepted price.
So,
The equilibrium price is Q* = 6
(b) If all the buyers are free riders, then the maximum willingness of the price of buyers is $0, because the willingness of the buyer's is lesser than the accepted minimum price of the sellers, for this producers will not be willingly to produce, thus the supplied quantity by private sellers is 0
Hence,
Q* = 0
(c) When forcing a $2-per-bag tax on sellers then, the price will increase to $9
So,
The new price of equilibrium is = $9
At the new equilibrium price $9 where 5 consumer and producer were willing and accepting to pay more than the equilibrium price
So,
The new equilibrium quantity is Q* = 5 bags
Now,
If the new equilibrium quantity of 5 bags is an optimal quantity,
Then,
(6-5) which results to 1 bag were overproduced.
Therefore,
Q* = 1
