6) The PE for a product is $50. The government feels this is unfair and they lower the price to $40. Is this a price ceiling or floor? What will be the result? In a graph, draw this situation and show the consumer surplus and producer surplus.

6) The PE for a product is $50. The government feels this is unfair and they lower the price to $40. Is this a price ceiling or floor? What will be the result? In a graph, draw this situation and show the consumer surplus and producer surplus.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 9PA

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Question

Price Control Graphs with Consumer and Producer
Surplus (Need help on these? The
6) The PE for a product is $50. The government feels this
is unfair and they lower the price to $40. Is this a price
ceiling or floor? What will be the result? In a graph, draw
this situation and show the consumer surplus and
producer surplus.
7) The PE for a product is $50. The government feels this
is unfair to the business and they raise the price to $60.
Is this a price ceiling or floor? What will be the result? In
a graph draw this situation and show the consumer and
producer surplus.
If the government limits the amount that can be bought
and sold that is called a "quota." (Need help on this?
8) Draw the following graph: Supply and demand
determines a PE of $10 and an EQ of 40. The
government limits the amount that can be bought and
sold and establishes a quota at 30 units. Show the new
supply curve (it will be a backwards L shaped line), a
new PE (let's say the new PE is $12). Also shade in the
area of consumer surplus, producer surplus and
deadweight loss.

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