The diagram to the right shows a market in which a price floor has been imposed. Calculate the following: a. Consumer surplus with this price floor is $ b. Producer surplus with this price floor is $. c. The deadweight loss is $ d. Compared to equilibrium, the transfer of consumer surplus to producers is $ Price 6.00 5.00 A 4.00... B 2.00 D 3.00.... F C E 35,000 70,000 Quantity Supply Pfloor Demand 05

The diagram to the right shows a market in which a price floor has been imposed. Calculate the following: a. Consumer surplus with this price floor is $ b. Producer surplus with this price floor is $. c. The deadweight loss is $ d. Compared to equilibrium, the transfer of consumer surplus to producers is $ Price 6.00 5.00 A 4.00... B 2.00 D 3.00.... F C E 35,000 70,000 Quantity Supply Pfloor Demand 05

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Price Controls and Quotas ― End of Chapter Problem The Venezuelan government has imposed a price ceiling on the retail price of roasted coffee beans. The accompanying diagram shows the market for coffee beans. In the absence of price controls, the equilibrium is at point E, with an equilibrium price of PE and an equilibrium quantity bought and sold of QE. After the introduction of the price ceiling, the price falls to Pc and the quantity bought and sold falls to Qc. a. Show the consumer surplus after the introduction of the price ceiling by using the shape CS (assuming that the consumers with the highest willingness to pay get to buy the available coffee beans; that is, assuming that there is no inefficient allocation to consumers). b. Show the producer surplus after the introduction of the price ceiling by using the shape PS (assuming that the producers with the lowest cost get to sell their coffee beans; that is, assuming that there is no inefficient allocation of sales among…
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