ANSWERS TO CHAPTER 13

Part 2

1. a. $5

   b. zero

   c. $6

   d. $3

   e. $9

2. a. A

   b. none

   c. A

   d. AB

   e. C

   f. ABC

   g. ABD

   h. CE

   i. ABCDE

   j. D

   k. E

   l. DE

   m. -B

   n. -C

   o. -BC

3. a. 2

   b. A

   c. none

   d. A-D

   e. D

   f. 8

   g. ABE

   h. BDE

   i. A-D

   j. D

   k. $5

   l. 6

   m. AB

   n. B

   o. A

4. a. 3

   b. ABCDEF

   c. CEFG

   d. ABD-G

   e. 2

   f. A

   g. BC

   h. $6

   i. DE

   j. ABCDE

   k. CE

   l. ABD

   m. T

5. a. When P=$4, QD=10

   b. The government's TR=PxQ=CDHK

   c. The government's TC=the area under SOCIAL SUPPLY=DGHIJK

   d. NET BENEFIT TO GOVT=TR-TC=C-GIJ

   e. FALSE because GIJ > C

   f. SEE TABLE.

   BEFORE	AFTER
   ABEFGJ	AE
   C-GIJ	BCF
   ABCEF-I	ABCEF

   The NET BENEFIT TO THE LUMBER CO'S IS THE CS. THE NET BENEFIT TO THE GOVT IS C-GIJ. SW=THE SUM OF THE NET BENEFITS TO BOTH. SW=ABCEF-I.

   g. AT BEST SW WOULD BE ABCEF, SO THE SWL=I

   h. $7

   i. When P=$7, QD=7

   j. The government's TR=PxQ=BCDFGH

   k. The government's TC=the area under SOCIAL SUPPLY=DGH

   l. NET BENEFIT TO GOVT=TR-TC=BCF

   m. T

   n. SEE TABLE. The NET BENEFIT TO THE LUMBER CO'S IS THE CS. THE NET BENEFIT TO THE GOVT IS BCF. SW=THE SUM OF THE NET BENEFITS TO BOTH. SW=ABCEF. IT IS AS LARGE AS IT CAN POSSIBLY BE. THERE IS NO SOCIAL WELFARE LOSS.