Suppose the figure to the right represents a local cattle market.2.40-What would be the effect on this market of the local government regulating aprice ceiling of $0.80 per pound?2.20-Supply2.00-of thousand pounds. (Enter yourThe market would have a1.80-response as a whole number.)1.60-1.40-1.20-1.00-0.80-0.60-0.40-Demand0.20-0.00-10 20 30 40 50 60 70 80 90 100 110 120Quantity (pounds in 1000s)Price (dollars per pound)

Price Ceiling refers to the maximum price set by the supplier at a level lower than the equilibrium…

Answered: Suppose the figure to the right…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 10PA

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Price ($/lb) Quantity Supplied (thousands of lbs per day) Quantity Demanded (thousands of lbs per day) 1.5 8 14 2 9 13 2.5 10 12 3 11 11 3.5 12 10 4 13 9 Now, suppose that instead of a price ceiling, the government simply pays flour sellers a subsidy of $1/lb on flour sales. How much flour would be sold? How much would consumers now pay for flour? How much would producers be paid in total for each pound of flour sold? On a separate graph, depict the equilibrium from question 1, alongside the equilibrium with the subsidy. XXXX
Suppose the market demand for organic grass-fed beef is given by Q=100-2P and the supply is given by Q= P/2 (quantity is given in thousand pounds). A) Find the equilibrium price of a pound of beef and the equilibrium quantity. B) Find the consumer surplus (CS) and producer surplus (PS) at the market equilibrium point. C) How will the equilibrium change if the government imposes a price ceiling of $20/pound? D) Show this market with the price ceiling in a supply and demand graph. E) Consider that the consumers who bought the beef at $20/pound are the ones with the highest willingness to pay (scenario 1), what is the new consumer surplus (CSnew) and the new producer surplus (PSnew)? F) What is the deadweight loss (DWL) after the price ceiling in scenario 1? G) What would happen in this market if, instead, the consumers who bought the beef were the ones with the lowest willingness to pay (scenario 2)? (Hint: You don’t have to show it mathematically, or graphically, but write…
Q^d= 9.5 - 2p Q^s= 0.6p Price Ceiling. Suppose that the government imposes a price ceiling equal to P C = 1.60. (a) Draw a diagram showing your market for donuts and indicate the price ceiling on this diagram. Is this price ceiling binding in your market for donuts? Carefully explain how you came to your answer. (b) If this price ceiling is binding, how many donuts will be sold in this market following its imposition, and at what price? (c) If this is a binding price ceiling, does it lead to a shortage or a surplus of donuts? If so, calculate the amount of this shortage or surplus.
iven the following information QD = 240-5P QS= P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price. Suppose the government decides to impose a tax of $12 per unit on sellers in this market. Determine the total surplus after tax.
Suppose the equations below represent the market supply and demand for cellular service. QD = 50 – 0.25P QS = 2P – 76 a. Graph the supply and demand curves, and label the equilibrium quantity and price. b. Calculate the amount of Consumer Surplus and Producer Surplus in this market. c. Suppose the government enacts a per-unit tax of $9 for each unit sold. Illustrate the effect of this tax in your graph of the market for cellular service, and calculate the new market price and quantity sold. d. Calculate the amount of deadweight loss associated with this per-unit tax. e. Calculate the share of the tax burden that the sellers bear. f. Briefly explain why there is a relationship between the slopes of the supply and demand curves, and the tax burden on each side of the market.
2. Demand curve is Q=42-1.5P. The supply curve is Q=5+2P. a) What is the equilibrium price and quantity? b)If you impose a $4 tax on suppliers, what is the new equilibrium price (for both buyers and sellers) and quantity? What is the tax incidence? Show all work, including a graph. c)If you impose a $4 tax on demanders, what is the new equilibrium price (for both buyers and sellers) and quantity? What is the tax incidence? Show all work, including a graph.
The market for jelly has a supply and demand given by the following: QD=200–10p QS=20p–100 (a) What is the consumer surplus and producer surplus? (b) Suppose to aid families, the government instates a price ceiling of 9. What is the resulting CS and PS. What is the deadweight loss? (c) Unhappy with the resulting shortages of jelly, the government removes the price ceiling and replaces it with a subsidy to consumers. What subsidy would be required to lower the price consumers pay to 9? (d) What is the resulting CS, PS from the subsidy? (e) How much does the subsidy cost the government? What is the DWL?
Consider the market for ice cream cones. Suppose that supply in this market is given by P^S = Q^S and demand is given by P^D = 30 - 4Q^D. Answer the following question. Suppose that the government is considering imposing a $4.00 price control as either a price ceiling or a price floor. Would this be a binding price control as a price floor or as a price ceiling? Will this cause a shortage or a surplus? Compute the size of the shortage or surplus that would result.
Suppose the market for grass seed (p is the price of grass seed) can be expressed as Demand: QD = 100 - 2p Supply: QS = 3p Find the market equilibrium price and quantity for grass seed. If government imposes a $5 specific tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected? What fraction of the tax is paid by consumers? What fraction of the tax is paid by producers?
If the government sets a price ceiling of $25, how much dead weight will be created? (a) $500 (b) $250 (c) $350 (d) $700 If the government sets a price ceiling at $45, the market will experience: (a) a shortage of 25 units. (b) a surplus of 25 units. (c) a shortage of 60 units. (d) a surplus of 60 units. (e) neither a shortage nor a surplus.

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