Consider the market for ethanol in the United States depicted in the figure to the right. Assume the world price of ethanol is $0.80 per gallon, and at that price the United States can buy as much ethanol as it wants without causing the world price to rise. Now suppose a quota eliminating trade is imposed by the government. What is the dollar amount of the change in consumer surplus as a result of the quota? $-4.20 billion. (Enter a numeric response using a real number rounded to two decimal places using the correct sign.) What is the dollar amount of the change in producer surplus as a result of the quota? $3.00 billion. What is the dollar amount of the dead weight loss? $ 1.20 billion C 2.80- 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20 5 1.001 0.80- 0.60- 0.40- 0.20- 0.00+ Price of ethanol (per gallon) to 0 Supply Deman 4 5 8 Quantity of ethanol (billion gallons per year)

Consider the market for ethanol in the United States depicted in the figure to the right. Assume the world price of ethanol is $0.80 per gallon, and at that price the United States can buy as much ethanol as it wants without causing the world price to rise. Now suppose a quota eliminating trade is imposed by the government. What is the dollar amount of the change in consumer surplus as a result of the quota? $-4.20 billion. (Enter a numeric response using a real number rounded to two decimal places using the correct sign.) What is the dollar amount of the change in producer surplus as a result of the quota? $3.00 billion. What is the dollar amount of the dead weight loss? $ 1.20 billion C 2.80- 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20 5 1.001 0.80- 0.60- 0.40- 0.20- 0.00+ Price of ethanol (per gallon) to 0 Supply Deman 4 5 8 Quantity of ethanol (billion gallons 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

Only typed answer

Consider the market for ethanol in the United States depicted
in the figure to the right. Assume the world price of ethanol is
$0.80 per gallon, and at that price the United States can buy
as much ethanol as it wants without causing the world price
to rise.
Now suppose a quota eliminating trade is imposed by the
government.
What is the dollar amount of the change in consumer surplus
as a result of the quota? $-4.20 billion. (Enter a numeric
response using a real number rounded to two decimal places
using the correct sign.)
What is the dollar amount of the change in producer surplus
as a result of the quota? $ 3.00 billion.
What is the dollar amount of the dead weight loss? $ 1.20
billion
Price of ethanol (per gallon)
2.80-
2.60-
2.40-
2.20-
2.00-
1.80-
1.60-
1.40-
1.20-
1.00-
0.80-
0.60-
0.40-
0.20-
0.00+
0
Supply
Deman
7
8
2 3 4 5 6
Quantity of ethanol (billion gallons per year)

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Step 1: Define demand and supply

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Step 4: Determine the deadweight loss due to quota

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