c & dDetailed answers Consider a market where demand and supply satisfy the following equationsQD = 12 – 2 P,Qs = 2P.a) Find the current equilibrium price and quantity.(4 marks)eb) What is the total producer surplus if the market is in equilibrium?(4 marks)eThe government is considering a minimum price policy to increase producer surplus.c) Explain by means of graphs how the introduction of a price floor can increaseproducer surplus.(6 marks)d) Find the (optimal) price floor that maximizes producer surplus.(6 marks)d

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Explain by means of graphs how the introduction of a price floor can increase producer surplus.

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 3PA

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Question

c & d

Detailed answers

Consider a market where demand and supply satisfy the following equations
QD = 12 – 2 P,
Qs = 2P.
a) Find the current equilibrium price and quantity.
(4 marks)e
b) What is the total producer surplus if the market is in equilibrium?
(4 marks)e
The government is considering a minimum price policy to increase producer surplus.
c) Explain by means of graphs how the introduction of a price floor can increase
producer surplus.
(6 marks)
d) Find the (optimal) price floor that maximizes producer surplus.
(6 marks)d

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