9 8 7 6 5 2 3 4 price MC=AC=2 P=10-Q MR Quantity X Y Z.

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Presentation transcript:

price MC=AC=2 P=10-Q MR Quantity X Y Z

Demand for adults Demand for seniors D C B ATotal welfare=A+B+C+D

B C To find the equation of line ABC Find slope: 5/200=1/40 So general equation is K-(1/40)q=p If p=0, K=6.25 Agg demand is /40(q)=p Agg MR is MR=6.25-(1/20)q A

3.625 Agg demand Agg MR MC=1 105 MR=MC 6.25-(1/20)q=1 q=105

Agg demand Agg MR MC=1 105 MR=MC 6.25-(1/20)q=1 q=105 A B C D E F G CS=ABECD PS=EFGC Welfare=ABECD+EFGC

A B C W X Y Z PS=A+B+C CS=W+X+Y+Z

Type A Type B

Type A Type B P=25 q= CSb=F=

Q K U1 U0 Φ

Q K U1 U0 Φ1Φ1 Q1 Q2 price

High Low c c+r Al Ah MR L MR H pHpH pLpL

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MC AC Demand P C ALL FLFL FMFM FHFH A C B D E G F H Q1Q2Q3 Profit from high income patients F H ADC ALL Profit from middle income patients BCED Loss from low income patients EFHG