Consider the figure below, where demand equals supply at the equilibrium price p* and quantity Q*. The government is considering two different policies to reduce the quantity traded in the market: (i) impose a quota, so the maximum quantity sold would be Q, and (ii) set a tax of $t per unit. p. $ per unit Pd p Ps t Select the correct answer I. II. III. Q Q* The change in welfare would be the same with both policies The government would be indifferent to either policy Consumers would be indifferent to either policy The government would prefer Policy (i) Consumers would prefer Policy (i) Supply Demand Q. Units per year

Consider the figure below, where demand equals supply at the equilibrium price p* and quantity Q. The government is considering two different policies to reduce the quantity traded in the market: (i) impose a quota, so the maximum quantity sold would be Q, and (ii) set a tax of $t per unit. p. $ per unit Pd p Ps t Select the correct answer I. II. III. Q Q The change in welfare would be the same with both policies The government would be indifferent to either policy Consumers would be indifferent to either policy The government would prefer Policy (i) Consumers would prefer Policy (i) Supply Demand Q. Units per year

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the figure below, where demand equals supply at the equilibrium price p* and quantity Q*. The government is considering two
different policies to reduce the quantity traded in the market: (i) impose a quota, so the maximum quantity sold would be Q, and (ii) set a tax
of $t per unit.
p. $ per unit
Pd
p*
Ps
t
Select the correct answer
I. II. III.
Q
Ġ
The change in welfare would be the same with both policies
The government would be indifferent to either policy
Consumers would be indifferent to either policy
The government would prefer Policy (i)
Consumers would prefer Policy (i)
Supply
Demand
Q. Units per year

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