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Suppose the government imposes a price ceiling of $50 on a market characterized by
the following information:
Qd = 700 - 2P Qs = 100 + 4P
Calculate the magnitude of deadweight loss from the price ceiling. Find a price floor that will result
in the same magnitude of deadweight loss. [Note: P = price per unit; Qd = hundreds of units demanded;
Qs = hundreds of units supplied]

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Jean Keeling
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3 Aug 2019
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Related questions

Suppose the market for cigarettes is characterized by the followinginformation:
Qd = 70 - 5P [Demand] Qs = 3P - 10 [Supply]
Suppose the government imposes a sales tax of $2 per unit.
i) Calculate the magnitude of the consumer surplus and producersurplus in the pre-tax equilibrium.
ii) Calculate the tax revenue in the post-tax equilibrium.
iii) Calculate the change in consumer surplus due to the salestax.
iv) Calculate the change in producer surplus due to the salestax.
v) Calculate the Dead-Weight-Loss due to the sales tax.
[Note: P = price per unit; Qd = thousands of units demanded; Qs =thousands of units supplied]

Consider a market characterized by the following demand and supply curves: Qd = 1600- 20p and Qs = - 900 + 30p

(a) Characterize the market equilibrium.

(b) If regulators decide to restrict payments by setting a price ceiling equal to $35, how many units will be sold or bought?

(c) Calculate the change in producer's surplus.

(d) Calculate the deadweight loss of the price ceiling.

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)

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