Question

1. Consider a market where supply and demand are given by QXS = -16 + PX...

1. Consider a market where supply and demand are given by QXS = -16 + PX and QXd = 92 - 2PX. Suppose the government imposes a price floor of $40, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $40 per unit. a. Determine the cost to the government of buying firms' unsold units. I know the answer for this $480 b. Compute the lost social welfare (deadweight loss) that stems from the $40 price floor. *****Please note I submitted this question before and the answer for part b was incorrect. The deadweight is not $48, $72, or $16.

Homework Answers

Answer #1

Market has QXS = -16 + PX and QXd = 92 - 2PX.

There is a price floor of $40, and government agrees to purchase all units consumers do not buy at the floor price of $40 per unit.

a. Determine the cost to the government of buying firms' unsold units.

Quantity demanded = 92 - 2*40 = 12 units Quantity supplied = -16 + 40 = 24.

Unsold units = 24 - 12 = 12

Price = $40

Cost to the government = 40*12 = $480.

b. Compute the lost social welfare (deadweight loss) that stems from the $40 price floor

DWL loss = (Area showing wastage of resources) = C + E = F = (Cost to the government - D) = 480 - 0.5*(Qs - Qd)*(Price floor - equilibrium price)

= 480 - 0.5*(24 - 12)*(40- 36) = $456

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a market where supply and demand are given by QXS = -16 + PX and...
Consider a market where supply and demand are given by QXS = -16 + PX and QXd = 92 - 2PX. Suppose the government imposes a price floor of $40, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $40 per unit. a. Determine the cost to the government of buying firms’ unsold units. b. Compute the lost social welfare (deadweight loss) that stems from the $40 price floor. *****Please...
Consider a market where supply and demand are given by QXS = -16 + PX and...
Consider a market where supply and demand are given by QXS = -16 + PX and QXd = 74 - 2PX. Suppose the government imposes a price floor of $34, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $34 per unit. Instructions: Enter your responses rounded to the nearest penny (two decimal places). a. Determine the cost to the government of buying firms’ unsold units. $ __________ b. Compute...
Consider a market where supply and demand are given by QXS = -18 + PX and...
Consider a market where supply and demand are given by QXS = -18 + PX and QXd = 90 - 2PX. Suppose the government imposes a price floor of $41, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $41 per unit. a. Determine the cost to the government of buying firms’ unsold units. b. Compute the lost social welfare (deadweight loss) that stems from the $41 price floor.
Consider a market where supply and demand are given by QXS = -16 + PX and...
Consider a market where supply and demand are given by QXS = -16 + PX and QXd = 83 - 2PX. Suppose the government imposes a price floor of $36, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $36 per unit. Instructions: Enter your responses rounded to the nearest penny (two decimal places). a. Determine the cost to the government of buying firms’ unsold units. $ 324 (I know...
Consider a market where supply and demand are given by QXS = -14 + PX and...
Consider a market where supply and demand are given by QXS = -14 + PX and QXd = 91 - 2PX. Suppose the government imposes a price floor of $42, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $42 per unit. Instructions: Enter your responses rounded to the nearest penny (two decimal places). a. Determine the cost to the government of buying firms’ unsold units. b. Compute the lost...
Consider a market where supply and demand are given by QXS = -18 + PX and...
Consider a market where supply and demand are given by QXS = -18 + PX and QXd = 81 - 2PX. Suppose the government imposes a price floor of $38, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $38 per unit. Instructions: Enter your responses rounded to the nearest penny (two decimal places). a. Determine the cost to the government of buying firms’ unsold units. b. Compute the lost...
Consider a market where supply and demand are given by QXS = -18 + PX and...
Consider a market where supply and demand are given by QXS = -18 + PX and QXd = 81 - 2PX. Suppose the government imposes a price floor of $38, and agrees to purchase any and all units consumers do not buy at the floor price of $38 per unit. Assume that the government simply removes product from the market through its purchase. a. Determine the cost to the government of buying firms’ unsold units. $____ b. Compute the lost...
I was given Chapter 2, Problem 10CCQ in Managerial Economics and Business Strategy Ninth Edition with...
I was given Chapter 2, Problem 10CCQ in Managerial Economics and Business Strategy Ninth Edition with some numbers changed. I seem to continue to get the wrong answer though I've gone through this question countless times. The first answer i'm getting is correct, but the second. the "lost social welfare" portion is wrong. The substituted numbers are as follows: When Qxs= -10+Px and Qxd=71-2Px price floor is $33.00. The first answer I'm getting is $594.00, the second answer i get...
Given the previous questions with a world price of 34, and the domestic demand and supply...
Given the previous questions with a world price of 34, and the domestic demand and supply curves given by the following equations: D: P= 80 - 2Q S: P= 10 + 3Q Suppose the government imposes a tariff equal to 6 which increases the price in the domestic market to 40. Given the tariff and new price to consumers, domestic consumers will now import ______ units of the good, the government will collect ______ in tariff revenue, and the total...
Consider a perfectly competitive market where the market demand curve is given by Q = 76−8P...
Consider a perfectly competitive market where the market demand curve is given by Q = 76−8P and the market supply curve is given by Q=−8+4P. In the situations (e), determine the following items (i-viii) (e) A market with price floor F = 6. i) The quantity sold in the market. ii) The price that consumers pay (before all taxes/subsidies). iii) The price that producers receive (after all taxes/subsidies). iv) The range of possible consumer surplus values. v) The range of...