Once again, go back to the original case. Describe the impact on the market quantity and surpluses if a price floor of $4 above the equilibrium price is imposed. Show this outcome and the deadweight loss introduced in a new graph. What about if a price ceiling of $4 below the equilibrium price is imposed? How are consumers and producers each affected, and by how much does total surplus decrease? Show the relevant areas in a new graph. What accounts for the difference between the outcomes at (d) and (e)? Compare the quantity changes, as well as the amounts of deadweight loss created.

Once again, go back to the original case. Describe the impact on the market quantity and surpluses if a price floor of $4 above the equilibrium price is imposed. Show this outcome and the deadweight loss introduced in a new graph. What about if a price ceiling of $4 below the equilibrium price is imposed? How are consumers and producers each affected, and by how much does total surplus decrease? Show the relevant areas in a new graph. What accounts for the difference between the outcomes at (d) and (e)? Compare the quantity changes, as well as the amounts of deadweight loss created.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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am. 163.
The graph below represents the market for flank steak in a specific town. Calculate the value of consumer surplus: When the market price is allowed to prevail, and When the town passes a law setting a price ceiling for flank steak of $13 per pound, what is the value of the deadweight loss after the town passes that law?
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Suppose the government sets a price ceiling above the equilibrium price for milk. Which of the following will be the result?
Consider a competitive market for corn for which the quantities demanded and supplied (per year) at various prices are given as follows: Price (RM) Demand (millions) Supply (millions) 60 22 14 80 20 16 100 18 18 120 16 20 1. What are the equilibrium price and quantity of corn? 2. Suppose the government sets a price ceiling of RM80, will there be a shortage or surplus and how much? Explain why the market is in disequilibrium. 3. What are the impacts from the regulated price by government?
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Suppose the market for My Bud Beer is described as follows. Qd = 300 - 4 P Qs = 6P Your job is to cause problems and institute a PRICE CEILING that will create a deadweight loss in this country. Which price ceiling would you implement? $40 $20 O $30
Consider a market where demand and supply satisfy the following equations QD = 12 – 2 P,e Qs = 2P. a) Find the current equilibrium price and quantity. b) What is the total producer surplus if the market is in equilibrium? - The government is considering a minimum price policy to increase producer surplus.- c) Explain by means of graphs how the introduction of a price floor can increase producer surplus. d) Find the (optimal) price floor that maximizes producer surplus.
What will happen in a market where the equilibrium price is $5 and a price ceiling of $4 is enacted? What about a price floor of $4?
Refer to the table in question 8. Suppose that the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling? Explain carefully the main effects. Demonstrate your answer graphically. Next, suppose that the government establishes a price flfloor of $4.60 for wheat. What will be the main effects of this price flfloor? Demonstrate your answer graphically.
Consider the market for corn. Suppose that right now, the equilibrium price is considered “too low” by farmers (i.e. suppliers) in order to make a living. These farmers go to their state representatives and convince them to enact a price floor that is above the equilibrium price. Depict this situation graphically. Is there a shortage or a surplus (or does nothing happen)? Now, conceptually, describe how we know with certainty, that consumers are harmed by this policy. Then, describe conceptually how farmers may be harmed or may benefit from this policy. Graphically depict how we know that consumers are harmed while farmers may be better or worse off (ambiguous). If we were to consider the “total surplus” of consumers and farmers, can we say with certainty whether this economy is better or worse off from the price floor?