The demand for ice cream is given by QD = 200 – 20P and the supply of ice cream is given by QS = - 100 + 40P. The quantity is measure in gallons of ice cream.-Calculate the consumer surplus, producer surplus, and total surplus at the market equilibrium.Now assume that the government decides to set the price of ice cream at $ 7.00 per gallon. Would this create a surplus or a shortage in the ice cream market? Calculate the surplus (or shortage).Calculate the consumer surplus, producer surplus, and total surplus at the new $ 7.00 price. What happened to each after the intervention of the government in the ice cream market?Calculate the deadweight loss after the imposition of the $ 7.00 price. Compare this to the deadweight loss associated with the market equilibrium. In your own words, explain why this deadweight loss is a measure of the inefficiency in the market created by the government intervention.

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Answered: The demand for ice cream is given by QD…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The demand for ice cream is given by Q_D = 200 – 20P and the supply of ice cream is given by Q_S = - 100 + 40P. The quantity is measure in gallons of ice cream.

Calculate the consumer surplus, producer surplus, and total surplus at the market equilibrium.

Now assume that the government decides to set the price of ice cream at $ 7.00 per gallon. Would this create a surplus or a shortage in the ice cream market? Calculate the surplus (or shortage).
Calculate the consumer surplus, producer surplus, and total surplus at the new $ 7.00 price. What happened to each after the intervention of the government in the ice cream market?
Calculate the deadweight loss after the imposition of the $ 7.00 price. Compare this to the deadweight loss associated with the market equilibrium. In your own words, explain why this deadweight loss is a measure of the inefficiency in the market created by the government intervention.

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