Market demand function is given by Qd = 180 - 2P, and a Market supply function is given by Qs = ‐ 15 + P. The market is government-regulated with a price support per unit and production quotas. If the price is set at $72 per unit, what production quota is needed to make sure there are no shortages or surpluses? Considering the price support and the quota, what is the: the consumer surplus? the producer surplus? the deadweight loss?
Considering the price support and the quota, what is the:
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. Due to good weather conditions, 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, what is:
The price observed in the market?
The consumer surplus?
The producer surplus?
The deadweight loss?
b. Suppose 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, what is:
The consumer surplus?
The producer surplus?
The deadweight loss?
c. Which of the government options in 1a. will be preferred by: The Producers? The Society?
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