Hi, could you please help me solve problems d, e, and f? Thank you! Question 5Refer to the information provided in Figure 4.3 below to answer the question(s) that follow.Price ($)0.550.500.450.400755025 Number of pencilsFigure 4.3S₁DQa) Refer to Figure 4.3. Which price labeled in the graph would be an example of an effectiveprice ceiling? What happens to the quantity demanded and quantity supplied at this price level?Is there a shortage or a surplus?b) Refer to Figure 4.3. Which price labeled in the graph would be an example of an effectiveprice floor? What happens to the quantity demanded and the quantity supplied at this pricelevel? Is there a shortage or a surplus?c) Refer to Figure 4.3. If the government will not allow retailers to charge more than $0.40 for apencil, how will pencils be rationed? How does this compare to how pencils are rationed if theprice is $0.45?d) Using the effective price ceiling from a), measure the inefficiency in the market for pencils.Show your calculation.e) Using the effective price floor from b), measure the inefficiency in the market for pencils.Show your calculation.f)Milton Friedman's "Lesson of a Pencil" lecture, explains why the equilibrium in the graphabove generates the largest "economic pie." Using the graph above, calculate the level of totalsurplus when the market is in equilibrium.

In the free market, the equilibrium price and quantity is determined by the forces of demand and supply. The demand curve is downward sloping indicating a negative relationship between price and quantity demanded, other things being constant. The supply curve is upward sloping curve indicating a positive relationship between price and quantity supplied, other things beings constant. The government can interfere in the free market by imposing taxes, regulating price or providing subsidies. The effective price ceiling is $0.40 corresponding to which quantity demanded is 75 units and quantity supplied is 25 units. The given graph is as follows: In the free market, the demand curve intersects the supply curve at point E corresponding to which price is $0.45 and quantity is 50 units. Consumer surplus is area above the price line and below demand curve. At price of $0.45 the consumer surplus is area 6+1+2 and at price of $0.40 the consumer surplus is area 6+1+3. Producer surplus is area below price line and above supply curve. At price of $0.45 producer surplus is area 3+4+5 and at price of $0.40 producer surplusis area 5. The loss of area 3 by producer is gained by consumer when price ceiling of $0.40 is imposed. So area 2 + 4 is dead-weight loss. DWL = area 2 + area 4=12×(0.50-0.40)×25=$1.25 Loss of efficiency due to price deiling is $1.25. e. In the free market, the demand curve intersects the supply curve at point E corresponding to which price is $0.45 and quantity is 50 units. Consumer surplus is area above the price line and below demand curve. At price of $0.45 the consumer surplus is area 6+1+2 and at price of $0.50 the consumer surplus is area 6 Producer surplus is area below price line and above supply curve. At price of $0.45 producer surplus is area 3+4+5 and at price of $0.40 producer surplusis area 5+3+1. The loss of area 1 by consumer is gained by consumer when price floor of $0.50 is imposed. So area 2 + 4 is dead-weight loss. DWL = area 2 + area 4=12×(0.50-0.40)×25=$1.25 Loss of efficiency due to price floor is $1.25. c. At equilibrium price of $0.45, consumer surplus is area 6 + 1+ 2 and producer surplus is area 3+ 4 + 5. Total surplus is sum of consumer surplus and producer surplus and is calculated as follows: Total surplus = Consumer surplus + Producer surplus=12×($0.55-$0.45)×50+12×($0.45-$0.35)×50=$2.5 + $2.5=$5 Total surplus is $5 at equilibrium point.