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.
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.
Consider the graph below that shows the supply and demand of Darby's Funnel cakes sold on...
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Suppose demand and supply are given by Qd = 60 – P and Qs = P -20 What are the equilibrium quantity and price in this market? Determine the quantity demanded, the quantity suppled, and the magnitude of the surplus id a price floor of $50 is imposed in this market. Determine the quantity demanded, the quantity suppled, and the magnitude of the shortage if a price celling of $32 is imposed in this market. Also determine the full economic...
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