Problem II: A competitive market is defined by the following demand and supply functions: P = 210 - 2Q and P = 30 + Q. a) Calculate total welfare on this market (5400) b) Calculate total welfare and the deadweight loss if a price floor of $80 is introduced by the government (5400, 0) c) Calculate consumer surplus, producer surplus, and the deadweight loss if a price floor of $110 is introduced by the government (2500, 2750, 150) d) Calculate total welfare and the deadweight loss if a price ceiling of $70 is introduced by the government (4800, 600) e) Calculate total welfare and the deadweight loss if a price ceiling of $100 is introduced by the government (5400, 0) f) Calculate total welfare and the deadweight loss if a per unit tax of $30 is introduced by the government (5250, 150) g) At this tax level, calculate the marginal effect of a tax increase on deadweight loss? (10)
Problem II: A competitive market is defined by the following demand and supply functions: P = 210 - 2Q and P = 30 + Q. a) Calculate total welfare on this market (5400) b) Calculate total welfare and the deadweight loss if a price floor of $80 is introduced by the government (5400, 0) c) Calculate consumer surplus, producer surplus, and the deadweight loss if a price floor of $110 is introduced by the government (2500, 2750, 150) d) Calculate total welfare and the deadweight loss if a price ceiling of $70 is introduced by the government (4800, 600) e) Calculate total welfare and the deadweight loss if a price ceiling of $100 is introduced by the government (5400, 0) f) Calculate total welfare and the deadweight loss if a per unit tax of $30 is introduced by the government (5250, 150) g) At this tax level, calculate the marginal effect of a tax increase on deadweight loss? (10)
