The graph below shows the market for widgets. The government is considering intervening in this market. $40 Demand $30 Supply $20 $10 0- 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Quantity a. Calculate the total producer surplus at the market equilibrium price and quantity. Show your work. b. If the government imposes a price floor at $16, is there a shortage, a surplus, or neither? Explain. c. If instead the government imposes a price ceiling at $12, is there a shortage, a surplus, or neither? Explain
The graph below shows the market for widgets. The government is considering intervening in this market. $40 Demand $30 Supply $20 $10 0- 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Quantity a. Calculate the total producer surplus at the market equilibrium price and quantity. Show your work. b. If the government imposes a price floor at $16, is there a shortage, a surplus, or neither? Explain. c. If instead the government imposes a price ceiling at $12, is there a shortage, a surplus, or neither? Explain
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
I need help answering questions a, b, c, d, ei and eii. (please show all work)
Thank you!!
![The graph below shows the market for widgets. The government is considering intervening in thiS market.
$40
Demand
$30
Supply
$20
$10
0246 8 10 12 14 16 18 20 22 24 26 28 30 32
no
Quantity
a. Calculate the total producer surplus at the market equilibrium price and quantity. Show your work.
b. If the government imposes a price floor at $16, is there a shortage, a surplus, or neither? Explain.
c. If instead the government imposes a price ceiling at $12, is there a shortage, a surplus, or neither? Explain.
d. If instead the government restricts the market output to 10 units, calculate the deadweight loss. Show
your
work.
e. Assume the price decreases from $20 to $12.
i. Calculate the price elasticity of demand. Show your work.
ii. In this price range, is demand perfectly elastic, relatively elastic, unit elastic, relatively inelastic, or
perfectly inelastic?
Price](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F48d7001c-664a-4538-941c-34d0f782871e%2F1ccff8f2-6c77-4651-9984-2be526becda8%2Fvabsxka_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The graph below shows the market for widgets. The government is considering intervening in thiS market.
$40
Demand
$30
Supply
$20
$10
0246 8 10 12 14 16 18 20 22 24 26 28 30 32
no
Quantity
a. Calculate the total producer surplus at the market equilibrium price and quantity. Show your work.
b. If the government imposes a price floor at $16, is there a shortage, a surplus, or neither? Explain.
c. If instead the government imposes a price ceiling at $12, is there a shortage, a surplus, or neither? Explain.
d. If instead the government restricts the market output to 10 units, calculate the deadweight loss. Show
your
work.
e. Assume the price decreases from $20 to $12.
i. Calculate the price elasticity of demand. Show your work.
ii. In this price range, is demand perfectly elastic, relatively elastic, unit elastic, relatively inelastic, or
perfectly inelastic?
Price
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