Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 6, Problem 10PA
Subpart (a):
To determine
Equilibrium price and equilibrium quantity .
Subpart (b):
To determine
Equilibrium price and equilibrium quantity with price ceiling .
Subpart (c):
To determine
Equilibrium price and equilibrium quantity with price floor .
Subpart (d):
To determine
Equilibrium price and equilibrium quantity with tax.
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Students have asked these similar questions
Consider a market that is initially in equilibrium and the equilibrium price and quantity are P and Q respectively. Then, the government decides to impose a price ceiling at a price of Pc that is less than P. Which of the following statements is correct?
1. After the price ceiling is imposed, the quantity demanded is less than the quantity supplied on the market.
2. After the price ceiling is imposed, the quantity actually sold in the market is lower than it was before the price ceiling was imposed.
3. Producer surplus in the market increased after the price ceiling was imposed.
4. Since Pc is less than P, the price ceiling is effective and therefore, there is no deadweight loss in the market.
The next 3 questions involve the following supply and demand equations.
Supply: q = 15 + (1/4)p Demand: q = 90 − (1/2)p
6. What is the market equilibrium?1
(A) p∗ =140,q∗ =50
(B) p∗ = 56.25, q∗ = 29.07 (C) p∗ = 29.07, q∗ = 160 (D) p∗ =100,q∗ =40
7. The government enacts a price ceiling of $80. What is the surplus (quantity supplied minus quantity demanded)?
(A) 15.
(B) 10.
(C) 25.
(D) None of the above
8. What is the Deadweight Loss under a price ceiling of $80?
(A) $875.
(B) $350.
(C) $525.
(D) None of the above.
suppose that demand in the market for good x is given by the equation Q^d=30 minus P and that supply in the market for good X is given by the equation Q^s=2P.
If the government set a price ceiling at $12, would there be a shortage or surplus, and how large would be the shortage/surplus?
Chapter 6 Solutions
Principles of Economics (MindTap Course List)
Ch. 6.1 - Prob. 1QQCh. 6.2 - Prob. 2QQCh. 6 - Prob. 1CQQCh. 6 - Prob. 2CQQCh. 6 - Prob. 3CQQCh. 6 - Prob. 4CQQCh. 6 - Prob. 5CQQCh. 6 - Prob. 6CQQCh. 6 - Prob. 1QRCh. 6 - Prob. 2QR
Ch. 6 - Prob. 3QRCh. 6 - Prob. 4QRCh. 6 - Prob. 5QRCh. 6 - Prob. 6QRCh. 6 - Prob. 7QRCh. 6 - Prob. 1PACh. 6 - Prob. 2PACh. 6 - Prob. 3PACh. 6 - Prob. 4PACh. 6 - Prob. 5PACh. 6 - Prob. 6PACh. 6 - Prob. 7PACh. 6 - A case study in this chapter discusses the federal...Ch. 6 - Prob. 9PACh. 6 - Prob. 10PA
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- The daily demand and supply curves for milk in the small town of Dairyville are as shown in the figure. Suppose the government imposes a price ceiling on milk of $5 per gallon. a. How many gallons of milk will be bought and sold each day after the imposition of the price ceiling? gallons per day b. What will be the excess demand for milk each day after the imposition of the price ceiling? gallons per day c. What will be consumer surplus after the imposition of the price ceiling? $ per day d. What will be producer surplus after the imposition of the price ceiling? $ per day e. What will be the loss in total economic surplus each day that results from the imposition of the price ceiling? $ per dayarrow_forwardConsider a market where demand and supply satisfy the following equations QD = 12 – 2 P, QS = 2P. The government is considering a minimum price policy to increase producer surplus. Explain by means of graphs how the introduction of a price floor can increase producer surplus. Find the (optimal) price floor that maximizes producer surplus.arrow_forwardIn a market with a price ceiling, the price is: Group of answer choices No answer text provided. actually the equilibrium price because the price ceiling has no effect on the market. set lower than the equilibrium price and represents the government mandated maximum price. set higher than the equilibrium price and represents the government mandated maximum price.arrow_forward
- Use the following supply and demand equations. Supply:p= 4 + 3q. Demand:p= 2,132−q. Use these equations to respond to the following questions. (a) What is the market equilibrium? (b) Under the market equilibrium, what is Total Surplus? (c) Suppose the government enacts a price ceiling of ̄p= 2,000. What is Producer Surplus, Consumer Surplus, Total Surplus, and Deadweight Loss? (d) Instead, suppose that the government enacts a price ceiling of ̄p= 1,100. What is Producer Surplus, Consumer Surplus, Total Surplus, and Deadweight Loss?arrow_forwardIf a price ceiling is set by the government above the market equilibrium price, then Group of answer choices A: the quantity demanded in the market is greater than the quantity supplied, thereby creating a surplus. B: the quantity supplied in the market is greater than the quantity demanded, thereby creating a shortage. C: the market equilibium price will prevail. D: the quantity supplied in the market is greater than the quantity demanded, thereby creating a surplus.arrow_forwardConsider a free market with demand equal to QQ = 900 − 10PP and supply equal to QQ = 20PP. Now the government imposes a $15 per unit subsidy on the production of the good. What is the consumersurplus now? The producer surplus? Why is there a deadweight loss associated with the subsidy, and whatis the size of this loss?arrow_forward
- What areas of the diagram above represent consumer surplus if the government does not impose any price controls? Select all that applyarrow_forwardConsider a free market with demand equal to QQ = 900 − 10PP and supply equal to QQ = 20PP. Now the government imposes a $15 per unit subsidy on the production of the good. What is the consumersurplus now? The producer surplus? Why is there a deadweight loss associated with the subsidy, and whatis the size of this loss? Demonstrate in a graph.arrow_forwardConsider a market where demand and supply satisfy the following equations QD = 12 – 2 P, QS = 2P. Find the current equilibrium price and quantity What is the total producer surplus if the market is in equilibrium? The government is considering a minimum price policy to increase producer surplus. Explain by means of graphs how the introduction of a price floor can increase producer surplus. Find the (optimal) price floor that maximizes producer surplus.arrow_forward
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