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ECON103_Assignment3 - ECON 103 Fall 2008 Simon Fraser...

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ECON 103, Fall 2008 Simon Fraser University Assignment 3 Due in tutorials in the week of November 3 RD . Problem 18 from Ch. 10 of the required textbook. (3 points) True or False. If either supply or demand is perfectly inelastic, a per unit tax on producers will not create any dead weight loss 1 . (3 points, use diagrams for full marks) Problem 1 . (4 points). Market demand is P D = 15 - . 75 Q and market supply is P S = . 25 Q . a) Suppose government imposes a quota of 10 units. Calculate the market price and quantity after the quota is imposed. Use a diagram to show the welfare impact of the quota: who gained and who lost as a result of the quota, show the dead weight loss on the diagram. b) Now suppose that government introduces a price floor in this market: the price is not allowed to go below 7.5. What will be resulting market price and quantity in this case? Show the impact of this policy on a diagram. . Problem 2. (10 points) Consider a competitive market with demand given by P D = 100 - 2 Q and supply given by P S = 10 + Q .
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