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?
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?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter6: Simple Pricing
Section: Chapter Questions
Problem 8MC
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The market for jelly has a supply and demand given by the following:
QD=200–10p
QS=20p–100
(a) What is the
(b) Suppose to aid families, the government instates a
and PS. What is the
(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?
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