1. The diagram below shows supply and demand in a perfectly competitive local market for cubic metres (m3) of garden soil


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a. At the equilibrium market price, determine the following values: total revenue received by sellers consumer surplus producer surplus total economic surplus


b. Now suppose that sellers in this market cooperate and restrict their total output to 30 m3 per day. At the resulting price of $45 per m3,determine each of the same values as in part (a).


c. What is the change in consumer surplus when output is restricted? What is the change in producer surplus?


d. What is the deadweight loss to the economy in this market when output is restricted? Show the area of this loss in the diagram.


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