Hi Could you please answer F G H thank you 1. Consider the market for cell phones in Celltown.Suppose that the inverse demand curve is P = -2Qd + 300 and thatthe inverse supply curve is P = 3Qs + 50.a. Sketch the inverse supply and inverse demand curves.b. Calculate the equilibrium price and quantity.c. Compute consumer surplus (CS), producer surplus (PS), and total surplus.d. Suppose the Mayor of Celltown institutes a price floor of P = $250 in order to promote thenew technology. It is illegal to sell cell phones at a price below P. What is the quantitytransacted in the market with the price floor?e. Compute the change in CS and the change in PS.f. Compute the change in total surplus. If you were an economic advisor to the Mayor whosegoal is to maximize the total surplus of the city, would you advise continuing the policy or not?Explain.g. A representative of the Association of Cell Phone Manufacturers arrives at the Mayor's officeto lobby against eliminating the price floor.i. Explain why economic theory predicts that producers might be willing to lobby for thepolicy. Are producers always in favor of price floors?ii. What is the most the lobbyist would be willing to donate to the Mayor's reelectioncampaign if the mayor promises to keep the policy?h. The Chief of Police reports arresting illegal grey market cell phone vendors. These vendorssell cell phones after the quantity at the price floor has already been sold. The illegal greymarket price is always below the price floor. Explain why economic theory predicts theexistence of a grey market.

Answered: f. Compute the change in total surplus.…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hi Could you please answer F G H thank you

1. Consider the market for cell phones in Celltown.
Suppose that the inverse demand curve is P = -2Qd + 300 and that
the inverse supply curve is P = 3Qs + 50.
a. Sketch the inverse supply and inverse demand curves.
b. Calculate the equilibrium price and quantity.
c. Compute consumer surplus (CS), producer surplus (PS), and total surplus.
d. Suppose the Mayor of Celltown institutes a price floor of P = $250 in order to promote the
new technology. It is illegal to sell cell phones at a price below P. What is the quantity
transacted in the market with the price floor?
e. Compute the change in CS and the change in PS.
f. Compute the change in total surplus. If you were an economic advisor to the Mayor whose
goal is to maximize the total surplus of the city, would you advise continuing the policy or not?
Explain.
g. A representative of the Association of Cell Phone Manufacturers arrives at the Mayor's office
to lobby against eliminating the price floor.
i. Explain why economic theory predicts that producers might be willing to lobby for the
policy. Are producers always in favor of price floors?
ii. What is the most the lobbyist would be willing to donate to the Mayor's reelection
campaign if the mayor promises to keep the policy?
h. The Chief of Police reports arresting illegal grey market cell phone vendors. These vendors
sell cell phones after the quantity at the price floor has already been sold. The illegal grey
market price is always below the price floor. Explain why economic theory predicts the
existence of a grey market.

Expert Solution

Step 1

In order to answer parts f through h we need results from part c,d and e.

In part c , we see that the value of consumers' surplus is $2500 and the value of producers' surplus is $3750.

If we calculate part e, we see that after the change in price, the new value of consumers' surplus (not the change in consumer surplus) is $625 and the new value of producers' surplus is $4062.5.

Now we can answer f and g.

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