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3) The demand for a product is given by p = d ( q ) =...

3) The demand for a product is given by p = d ( q ) = − 0.8 q + 150 and the supply for the same product is given by p = s ( q ) = 5.2 q. For both functions, q is the quantity and p is the price in dollars. Suppose the price is set artificially at $70 (which is below the equilibrium price).

a) Find the quantity supplied and the quantity demanded at this price.
b) Compute the consumer surplus at this price, using the quantity demanded.
c) Compute the producer surplus at this price, using the quantity demanded (why?)
d) Find the total gains from trade at this price.
e) What do you observe?

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