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Once again, go back to the original case. Describe the impact on the market quantity and surpluses if a price floor of $4 above the equilibrium price is imposed. Show this outcome and the deadweight loss introduced in a new graph. What about if a price ceiling of $4 below the equilibrium price is imposed? How are consumers and producers each affected, and by how much does total surplus decrease? Show the relevant areas in a new graph. What accounts for the difference between the outcomes at (d) and (e)? Compare the quantity changes, as well as the amounts of deadweight loss created.

Once again, go back to the original case. Describe the impact on the market quantity and surpluses if a price floor of $4 above the equilibrium price is imposed. Show this outcome and the deadweight loss introduced in a new graph. What about if a price ceiling of $4 below the equilibrium price is imposed? How are consumers and producers each affected, and by how much does total surplus decrease? Show the relevant areas in a new graph. What accounts for the difference between the outcomes at (d) and (e)? Compare the quantity changes, as well as the amounts of deadweight loss created.

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter5: Difficult Cases For The Market And The Role Of Government
Section: Chapter Questions
Problem 10CQ
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P 1. Consider a competitive market where daily supply and demand are QP(P) = 15 - QS(P) = 2P, where quantities are measured in thousands of units and prices are in dollars per unit. Assume that this market does not create any externalities benefits are borne by the sellers and buyers directly involved in the market. 2 meaning that all costs and
Transcribed Image Text:P 1. Consider a competitive market where daily supply and demand are QP(P) = 15 - QS(P) = 2P, where quantities are measured in thousands of units and prices are in dollars per unit. Assume that this market does not create any externalities benefits are borne by the sellers and buyers directly involved in the market. 2 meaning that all costs and
d. Once again, go back to the original case. Describe the impact on the market quantity and surpluses if a price floor of $4 above the equilibrium price is imposed. Show this outcome and the deadweight loss introduced in a new graph. e. What about if a price ceiling of $4 below the equilibrium price is imposed? How are consumers and producers each affected, and by how much does total surplus decrease? Show the relevant areas in a new graph. f. What accounts for the difference between the outcomes at (d) and (e)? Compare the quantity changes, as well as the amounts of deadweight loss created.
Transcribed Image Text:d. Once again, go back to the original case. Describe the impact on the market quantity and surpluses if a price floor of $4 above the equilibrium price is imposed. Show this outcome and the deadweight loss introduced in a new graph. e. What about if a price ceiling of $4 below the equilibrium price is imposed? How are consumers and producers each affected, and by how much does total surplus decrease? Show the relevant areas in a new graph. f. What accounts for the difference between the outcomes at (d) and (e)? Compare the quantity changes, as well as the amounts of deadweight loss created.
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