Question: Again, demand is Q_D = 32 - 1.5P and supply is Q_S = -20 + 2.5P. Now, however, buyers and sellers have transaction costs of $2 and $3 per unit, respectively. Compare the equilibrium values with those you calculated for Problem.

Problem: In a perfectly competitive market, demand is Q_D = 32 - 1.5P and supply is Q_S = -20 + 2.5P. Find equilibrium price and quantity and producer and consumer benefits. Say an innovation then lowers every seller's marginal costs by $5 at all outputs. Find the new price, quantity, and producer and consumer surpluses.