Question

QUESTION 36 Exhibit 7-11 Supply Price P _Price Ceiling Demand @ Quantity Refer to Exhibit 7-11. The deadweight loss from the price ceiling is area; a. d+e+f Obc+e Ocb+c d. dte

Answer 1

Ques1: The deadweight loss is the decrease in social welfare due to Price Ceiling impose by the government.

The Deadweight Loss in the above figure is the area C + E.

Hence, Option B is correct.

Ques2: Option D is correct as the price of tennis rackets increases, demand for rackets will decrease. This is because of the law of demand which represents the inverse relationship between price and quantity demanded.

Option A is wrong as Supply will increase as the price of tennis rackets will increase.

Option B is wrong as demand will decrease.

Option C is also wrong as there is movement along the supply curve.

Ques3: Option D is correct. As wireless network provider knows more than the buyer hence it will create asymmetric information.

Ques4: when the Demand curve is D2 and the Supply curve is S1 the equilibrium price is $8 and Equilibrium Quantity will be 15. But as there is a change in the demand curve from D2 to D1 the equilibrium price will be $6 and the Equilibrium quantity will be 13. Hence, Option C is correct as there is a decrease in equilibrium quantity from 15 to 13.