ECN100_PS5_sp08

# ECN100_PS5_sp08 - This problem set is not collected Problem...

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This problem set is not collected . Problem Set 5 ECN100 Instructor: Masako Miyanishi Chapter 16 1. Here are the supply and demand functions for DVD’s , where p is the price in dollars: Q d =40-p (demand function) and Q s =10+p (supply function). Draw the demand and supply curves for DVD’s . a. what is the equilibrium price of a DVD? What is the equilibrium quantity? b. Suppose that the government decides to restrict the industry to selling only 20 DVD’s. At what price would 20 DVD’s be deman ded? At what price would the suppliers supply only 20 units? c. The government wants to make sure that only 20 DVD’s are bought, but it doesn’t want the firms in the industry to receive more than the minimum price that it would take to have them supply 20 DVD’s. One way to do this is for the government to issue 20 ration coupons. Then in order to buy a DVD, a consumer would need to present a ration coupon along with the necessary amount of money to pay for the good. If the ration coupons were freely bought and sold on the open market, what would be the equilibrium price of these coupons? d. On the graph above, shade in the area that represent the deadweight loss from restricting the supply

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ECN100_PS5_sp08 - This problem set is not collected Problem...

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