Consider a market characterized by the following inverse demand and supply functions: PX = 10 - 2QX and PX = 2 + 2QX. Compute the loss in social welfare when an $8 per unit price floor is imposed on the market.
A. $1.
B. $0.
C. $3.
D. $2.
Answer: D
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Fill in the blank(s) with the appropriate word(s).
The size of a deadweight loss in a market is reduced by
A) market price being close to marginal cost. B) government legislating a ceiling price. C) government legislating a price floor. D) creative destruction.
Explain how each of the following events would affect the short-run aggregate supply curve
a. A decrease in the price level b. A decrease in what the price level is expected to be in the future c. A price level that is currently lower than expected d. An unexpected decrease in the price of an important raw material e. A decrease in the labor force
If one day a terrible disease were to wipe out over one-half of the world's lime trees, which of the following would likely result?
A) The supply curve of lime juice would shift downward and to the right. B) The supply curve of lime juice would shift upward and to the left. C) The demand curve for lime juice would shift to the right. D) The demand curve for lime juice would shift to the left.