Question

Consider the graph below that shows the supply and demand of Darbys Funnel cakes sold on a given day from her food truck inWhich price and quantity combination would be consistent with the notion of MARKET EFFICIENCY if all of the assumptions we maWhen this market is in equilibrium, what is the consumer surplus to a consumer who is willing to pay $10 for one of Darbys fIf the government were to impose a PRICE CEILING in this market, which of the following is the most likely justification? O TSuppose that the government imposes a PRICE FLOOR in this market at a price of $10. What is the impact? There will be a shortSuppose that the government imposes a PRICE FLOOR in this market at a price of $6. What is the impact? o There will be a shorSuppose that there are no government price controls in this market, but Darby has not been changing the oil that she uses to

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Answer #1

Ans) 1) Equilibrium is the efficient point. Equilibrium is where demand and supply curve intersect.

So, equilibrium quantity is 6 and equilibrium price is $7.

Option c.

2) Consumer surplus = willingness to pay - market price = 10-7 = 3

Option d.

3) Price ceiling is imposed by the government when it feels that the prevailing price is too high and is aimed to protect the consumer.

Option a.

4) Price floor leads to surplus.

Option b.

Consider the graph below that shows the supply and demand of Darbys Funnel cakes sold on a given day from her food truck in

5) A price floor below the market price is ineffective. And the market will operate at original equilibrium. And at market equilibrium, there is no shortage and no surplus.

Option d.

6) People falling sick is an example of negative externality. And in negative externality, socially optimal quantity is less than market quantity.

Option b.

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