Suppose that a new technology allows beginner level violin producers to make violins at a substantially lower marginal cost
while retaining the same quality. This causes the market supply curve to increase from S1 to S2
A. Place the area labeled CS to represent the new consumer surplus in the market and the area labeled PS to represent the new producer surplus in the market.
B. How much does this new technology increase consumer surplus?
Increase in consumer surplus
C. The housing market often involves transactions with asymmetric information.
Which accurately characterizes the
information asymmetry?
Which is a step often taken to minimize the information
asymmetry in these types of transactions?