--%>
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 : Annual total revenue of production When

    When Prohibition Corporation maximizes profit in its production of St. Valentine’s Day software, so annual total revenue of it will be around: (1) $140 million. (2) $250 million. (3) $320 million. (4) $420 million. (5) $1 billio

    		•
  • Q : Investor Optimism for Loanable Funds An

    An increase within investor optimism will cause: (w) interest rates to rise. (x) slower technology advances. (y) slumps in business construction. (z) interest rates to fall. Please choose the right answer from abov

    		•
  • Q : Implicit Costs-Earning income The

    The economic cost borne by you as the college student which would be ignored by the bookkeeper whenever computing costs however that economists would consider the implicit cost of your education would be: (1) Food, similar costs and rent which you would incur even whe

    		•
  • Q : Patent new invention included in

    Predatory behavior would not comprise: (w) aggressive advertising. (x) monopolizing access to essential resources. (y) lowering prices. (z) getting a patent on a new invention which is likely to start a new industry.

    Q : Determine equality of marginal revenue

    Marginal revenue equals the change within total: (w) profit as output expands slightly. (x) output from hiring an additional worker. (y) revenue from selling an extra unit of output. (z) tax rates while tax revenue increases a bit.

    Q : Analysis deregulation caused the

    Choose the right answer of the following problem. "The government deregulated the electricity industry in California and a shortage of electricity occurred soon . It is clear that the deregulation caused the shortage." This statement requires careful analysis becau

    		•
  • Q : Ratio of Wealth and Poverty In 1980

    In 1980 year, the chief executive officers that stand for CEOs of main corporations had income which averaged roughly 40 times as much as the workers they working. In 2005, such ratio is less than: (1) twenty to one. (2) forty to one. (3) one hundred

    		•
  • Q : Advantages of regional integration Give

    Give the basic advantages of regional integration?

    		•
  • Q : Problem based on type of economy Tell

    Tell me the answer of this question. Economists would describe the U.S. automobile industry as: A) purely competitive. B) an oligopoly. C) monopolistically competitive. D) a pure monopoly.

    		•
  • Q : Collective Bargaining-managers and

    The strikes tend to be resolved after worker’s savings trickle down to a discomfort region and there is an exhaustion of: (i) Public tolerance, causing government to set the fair settlement. (ii) Managers and inventories, causing the firms to increase their offe

    		•