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8. Suppose we're still analyzing a price floor of P=$90. What is the Producer Surplus after the price floor? a. PS=$5500 b. PS=$500 c. PS=$820 d. PS=$500 e. None of the above

8. Suppose we're still analyzing a price floor of P=$90. What is the Producer Surplus after the price floor? a. PS=$5500 b. PS=$500 c. PS=$820 d. PS=$500 e. None of the above

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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### Question 8: Understanding Producer Surplus with a Price Floor **Scenario:** Suppose we're still analyzing a price floor of P=$90. What is the Producer Surplus after the price floor? **Options:** a. PS=$5500 b. PS=$500 c. PS=$820 d. PS=$500 e. None of the above **Explanation:** This question is testing your understanding of producer surplus in the context of a price floor. A price floor is a government-imposed limit on how low a price can be charged for a product. If the price floor is above the equilibrium price, it can lead to surplus production. To determine the correct answer, one would typically need additional information regarding the demand and supply curves, or a graph depicting the producer surplus area after the introduction of the price floor. Since this information is not provided directly, you'll need to use the given options and make a calculated inference based on typical economic principles. Select the option that accurately reflects the producer surplus given a price floor of P=$90. --- This educational resource is designed to help economics students understand the impact of price floors on producer surplus. Detailed graphs and further explanations can be found in the following sections of the course.
Transcribed Image Text:### Question 8: Understanding Producer Surplus with a Price Floor **Scenario:** Suppose we're still analyzing a price floor of P=$90. What is the Producer Surplus after the price floor? **Options:** a. PS=$5500 b. PS=$500 c. PS=$820 d. PS=$500 e. None of the above **Explanation:** This question is testing your understanding of producer surplus in the context of a price floor. A price floor is a government-imposed limit on how low a price can be charged for a product. If the price floor is above the equilibrium price, it can lead to surplus production. To determine the correct answer, one would typically need additional information regarding the demand and supply curves, or a graph depicting the producer surplus area after the introduction of the price floor. Since this information is not provided directly, you'll need to use the given options and make a calculated inference based on typical economic principles. Select the option that accurately reflects the producer surplus given a price floor of P=$90. --- This educational resource is designed to help economics students understand the impact of price floors on producer surplus. Detailed graphs and further explanations can be found in the following sections of the course.
The demand and supply for bicycles is given by the following equations: - Demand: \( Q^d = 1000 - 10P \) - Supply: \( Q^s = 2P - 20 \) In these equations, \(Q^d\) represents the quantity demanded, \(Q^s\) represents the quantity supplied, and \(P\) represents the price of the bicycles. ### Explanation: - **Demand Equation (\( Q^d = 1000 - 10P \)):** - This equation shows that the quantity demanded (\(Q^d\)) decreases as the price (\(P\)) increases. Specifically, for each unit increase in price, the quantity demanded decreases by 10 units. - The constant term (1000) indicates the maximum demand when the price is zero. - **Supply Equation (\( Q^s = 2P - 20 \)):** - This equation shows that the quantity supplied (\(Q^s\)) increases as the price (\(P\)) increases. Specifically, for each unit increase in price, the quantity supplied increases by 2 units. - The constant term (-20) can be interpreted as the level of supply at a zero or very low price, indicating that no supply would be available if the price is too low. These equations illustrate the basic economic principles of supply and demand, where typically, higher prices reduce demand but increase supply.
Transcribed Image Text:The demand and supply for bicycles is given by the following equations: - Demand: \( Q^d = 1000 - 10P \) - Supply: \( Q^s = 2P - 20 \) In these equations, \(Q^d\) represents the quantity demanded, \(Q^s\) represents the quantity supplied, and \(P\) represents the price of the bicycles. ### Explanation: - **Demand Equation (\( Q^d = 1000 - 10P \)):** - This equation shows that the quantity demanded (\(Q^d\)) decreases as the price (\(P\)) increases. Specifically, for each unit increase in price, the quantity demanded decreases by 10 units. - The constant term (1000) indicates the maximum demand when the price is zero. - **Supply Equation (\( Q^s = 2P - 20 \)):** - This equation shows that the quantity supplied (\(Q^s\)) increases as the price (\(P\)) increases. Specifically, for each unit increase in price, the quantity supplied increases by 2 units. - The constant term (-20) can be interpreted as the level of supply at a zero or very low price, indicating that no supply would be available if the price is too low. These equations illustrate the basic economic principles of supply and demand, where typically, higher prices reduce demand but increase supply.
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