Suppose now that the government decides to increase the number of quotas available to 72 units , but it keeps the price support at the current level of $72 calculate the consumer surplus Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190 - 2P.The government is trying to decide between two options:%3D• Maintain the number of quotas and let the market adjust, or• Maintain the price support and increase the number of quotas.Suppose that the government decides to maintain the number of quotas and let the market adjust.(c) Calculate the(i) price observed in the market,HINT: Sketch the supply and demand equations.Answer: Question 6A market has a demand function given by the equation Qd = 180 – 2P, and a supply function given by the equation Qs= -15 + P. The market is government-regulated with a price support per unit and production quotas. (NOTE: Aproduction quota is a restriction on the quantity of the good that can be produced. Firms are not allowed to%3D%Dproduce more than the quota)(a) If the price is set at $72 per unit, what production quota is needed to make sure there are no shortages orsurpluses?HINT: Sketch the supply and demand equations.

Solution: First, derive the equilibrium price and quantity: At equilibrium: Qd = Qs 180 – 2P = -15 +…

Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190-2P. The government is trying to decide between two options: • Maintain the number of quotas and let the market adjust, or • Maintain the price support and increase the number of quotas. Suppose that the government decides to maintain the number of quotas and let the market adjust. (c) Calculate the (i) price observed in the market,

Due to good weather, there is an increase in the demand for the good. The new demand equation is Qd = 190-2P. The government is trying to decide between two options: • Maintain the number of quotas and let the market adjust, or • Maintain the price support and increase the number of quotas. Suppose that the government decides to maintain the number of quotas and let the market adjust. (c) Calculate the (i) price observed in the market,

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 5E

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