--%>
Assignment Help - homework help

Market Price in intervention

Let’s take a perfectly competitive market in which the market demand curve is provided by Qd = 20 − 2Pd and the market supply curve is provided by Qs = 2Ps.

a) Determine the equilibrium price and quantity in the lack of government intervention.

b) Assume that the government obliges a price ceiling of $3 per unit. How much is supplied?

c) Assume that, as an alternative, the government obliges a production quota restricting the quantity supplied to 6 units. Determine the market price beneath this kind of intervention? Is the quantity supplied beneath the price ceiling bigger than, less than, or similar as the quantity beneath the production quota?

E

Expert

Verified

a) Letting P = Pd = Ps stand for the market price in the lack of government intervention, we encompass: 20 – 2P = 2P => P = 5. Therefore the equilibrium quantity is 10 units.

b) The quantity supplied beneath a price ceiling of $3 per unit is 6 units.

c) The market-clearing price whenever a production quota of 6 is obliged is provided by 6 = 20 – 2P or P = 7.

   Related Questions in Microeconomics

  • Q : Selling footballers-the economic

    State economic arguments on whether a football club must sell a significant player?

    		•
  • Q : Total costs incur by profit-maximizing

    Hybrid Roses is the merely florist in 60 miles of Presidio, Texas. When total fixed costs (for example, rent and utilities) are $9 per hour, that profit-maximizing monopolist will incur total costs of around: (w) $20 per hour. (x) $27

    		•
  • Q : Consumer behaviour Graphical

    Graphical representation of relationship between MPC and multiplier?

    		•
  • Q : Import cars in equilibrium When the

    When the import car market is in equilibrium prior to the government limits car imports to Q1, the price that buyers will reimburse for an import: (1) Drops/falls from P0 to P1. (2) Is stable, although dealer gains fall by Q0 to Q1. (3) Increases from P0 to P2. (4) Ex

    		•
  • Q : Problem on Boycotts People who reject

    People who reject to purchase the products of a firm whose actions they condemn, especially when such rejection is intended to support the employees who are on strike, and who urge others to not purchase such products, or to not deal with these firms, are engaged in a

    		•
  • Q : Price elasticity inconsistent with

    Of the given price elasticities for market supply curves or market demand curves, and the one which is absolutely inconsistent along with standard economic theory would be one for that, across feasible ranges of prices as: (i) supply

    		•
  • Q : Minimizes losses and maximizes profits

    When Firm B in demonstrated graph successfully minimizes losses and maximizes its profits that have: (1) covered overhead while incurring short-run economic losses. (2) potential economic profit of Pbgh per period. (3) total costs equal to 0phq2. (4)

    		•
  • Q : Law of demand is price in the law of

    is price in the law of demand an absolute or relative price

    		•
  • Q : Short-run supply curve of the firm For

    For a competitive firm the short-run supply curve is the: (w) marginal cost curve which is above the average total cost curve. (x) marginal cost curve which is above the average variable cost curve. (y) upward sloping part of the marginal cost curve.

    		•
  • Q : Determine probable price taker Of the

    Of the given firms, the probably to be a price taker would be: (1) Microsoft. (2) Wal-Mart. (3) Toyota. (4) the Los Angeles Lakers. (5) the biggest wheat farm in Canada. I need a good answer on the topic of