Price Controls And Taxes

Question 1

Suppose the demand is P = 250 - 3Q and supply is P = 50 + Q. If there is a price ceiling of $90, what would be the consumer surplus, producer surplus and deadweight loss?

Answer 1

PS: 800
CS:4000
DWL:200

Question 2

Suppose the demand is P = 250 - 3Q and supply is P = 50 + Q. If there is a price floor of $130, what would be the consumer surplus, producer surplus and deadweight loss?

Answer 2

PS: 2400
CS:2400
DWL: 200

Question 3

Consider a perfectly competitive market without externalities. Market demand is given by MWTP(Q) = 20−1/5Q
and market supply is given by MC(Q) = 1/2Q + 6
Calculate TS, CS, PS at the market outcome without any interventions.

Answer 3

40,100,140

Question 4

Consider a perfectly competitive market without externalities. Market demand is given by MWTP(Q) = 20−1/5Q
and market supply is given by MC(Q) = 1/2Q + 6
Calculate TS, CS, PS at the market outcome without any interventions.

Calculate TS, CS and PS at the market outcome with a P = 10 price ceiling imposed on the market.

Answer 4

CS:73.6
PS:16
TS=89.6
DWL=-50.4

Question 5

Consider a perfectly competitive market without externalities. Market demand is given by MWTP(Q) = 20−1/5Q
and market supply is given by MC(Q) = 1/2Q + 6

Calculate TS, CS and PS DWL at the market outcome with a P = 18.4 price floor imposed on the market.

Answer 5

CS:6.4
PS:83.2
TS:89.6
DWL:-50.4

Question 6

Consider a perfectly competitive market without externalities. Market demand is given by P = MWTP =
24 − 1/3 Q and market supply is given by P = MC = 1/2 Q + 6.
Calculate TS, CS, PS, government revenue at the market outcome with a $2 tax imposed on the market.