PS 8 Sol - UNIVERSITY OF WISCONSIN Economics 101 Spring...

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UNIVERSITY OF WISCONSIN Economics 101 – Spring 2008 Problem Set 8 Due on April 14 at noon (Notice: most of the material in this problem set will be covered during this week’s lectures. So, you may want to wait until your discussions to start doing it.) Please be sure to include (1) your name, (2) your teaching assistant s name, and (3) your section time on your answers. Please staple pages together. Also note that late homework will not be accepted. Remember that you can help each other but each student has to hand a hand-written solution of the problem set. F you hand back your problem set to your TA s mailbox, it is absolutely prohibited to look at problem sets that have already been placed there. This practice will be considered a form of cheating and will be dealt with accordingly. Q1. 1. Suppose the market for rice can be described by the following equations: Demand: Qd=5500-5P Supply: Qs = 6P The market equilibrium price is $500 and quantity is 3000. 2. What are the Consumer Surplus and Producer Surplus in the market equilibrium? CS=(1100-500)*3000/2=900,000 PS=500*3000/2=750,000 3. If the government establishes a price floor of $700, how many rice will be sold? How much excess supply we will have? When the price is $700, Qd=5500-5*700=2000 and Qs = 6*700=4200
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This note was uploaded on 07/13/2008 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at University of Wisconsin.

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PS 8 Sol - UNIVERSITY OF WISCONSIN Economics 101 Spring...

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