Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government is trying to decide between two options: • Maintain the number of quotas and let the market adjust, or • Maintain the price support and increase the number of quotas. Suppose that the government decides to maintain the number of quotas and let the market adjust. (C) Calculate the (i) price observed in the market,
Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government is trying to decide between two options: • Maintain the number of quotas and let the market adjust, or • Maintain the price support and increase the number of quotas. Suppose that the government decides to maintain the number of quotas and let the market adjust. (C) Calculate the (i) price observed in the market,
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Answer the following, The focus should be on the second picture thank you.
Transcribed Image Text:Suppose now that the government decides to increase the number of quotas available to 72 units, but it keeps the price support at the
current level of $72.
d) Calculate
(i) the consumer surplus,
Answer:
(ii) the producer surplus,
Answer:
(iii) deadweight loss,
Transcribed Image Text:Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 – 2P. The government
is trying to decide between two options:
• Maintain the number of quotas and let the market adjust, or
• Maintain the price support and increase the number of quotas.
Suppose that the government decides to maintain the number of quotas and let the market adjust.
(c) Calculate the
(i) price observed in the market,
HINT: Sketch the supply and demand equations.
Answer:
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