What are a consumer and a producer?

IMPORTANT, PLS HELP, What is the price and quantity if the sum of consumer and producer surplus is maximixed?

• Two firms, GC(Q1) & BQ(Q2) both firms demand is given by P=11-Q1-Q2, Constant MC=1, What is the market outcome i.e. price and quantity sold on the market and what is the price and quantity if the sum of consumer and producer surplus is maximized (pareto efficient quantity). Derive the latter quantity first.

• Answer:

  pareto quantity comes from P=MC 1=11-Q Q=10 In the market, I assume firms set quantities (Q1 and Q2), and let market determine the price. (If they set prices, they end up with P1=P2=C, which is same as paretto efficient. But you got Q1 and Q2, and single price, so they do set quantities) Firms solve MR=MC Take firm 1 R(Q1)=(11-Q1-Q2)Q1 MR = 11-2*Q1-Q2 11-2*Q1-Q2 = 1 Q1=(10-Q2)/2 and 2's MR=MC gives Q2=(10-Q1)/2 Since firms have same cost, they will have same Q's, so Q1=Q2, so you can solve Q1=(10-Q1)/2 Q1=10/3=3.333 = Q2 and market price is P=11-Q1-Q2 = 11-6.667 = 4.333