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1. Assume market demand is given by: QD = 10 – P and market supply by:...

1. Assume market demand is given by: QD = 10 – P and market supply by: QS = P – 2. Let’s consider a situation where the government is seeking to control price at below equilibrium level, at PC = $4. In other words, the government is imposing a price ceiling, which prevents the market from clearing at a higher free market equilibrium price. The welfare loss created by such a policy is equal to [$]. (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero and trailing zeros when needed. HINTS: Sketch the Marshallian “cross” diagram of supply and demand to help you answer this question.)

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