(a) AT MARKET PRICE
(b) AT EFFICIENCY PRICE
Homework Answers
If the product is sold at market price of $1,875 then, revenue= $1875* 50,000= 93,750,000
Benefit= Revenue- Cost= 93,750,000- 95,000,000= (1,250,000) loss
If the product is sold at market price + price of subsidy (efficiency price)=
Revenue= 1875*700/75= 2500
Revenue= $2500*50000= $125 million
Benefit= $125 million - $95 million= $35 million.
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