Tut3 - 500P. If TV sets are sold in a perfect, competitive...

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Economics 290: Canadian Microeconomic Policy Tutorial #3 (Week of May 28) 1. Assume the market for coffee is perfectly competitive. Demand is given by Q d = 1000−5P and supply is given by Q s = 4P −80. (a) Find consumer, producer, and total surplus. (b) Now assume that the maximum price for coffee is set $20 below the equilibrium price. Find consumer, producer, and total surplus. Find the deadweight loss. (c) Show the effect of the price control on both producers and consumers on a diagram in Q-P space. (d) If the government wanted to achieve the controlled price above using a tax or subsidy, what should the government set the tax or subsidy at? 2. Suppose the marginal social cost of TV set is $100. This is constant and equal to the average cost of TV sets. The annual demand for TV sets is given by Q = 200,000 –
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Unformatted text preview: 500P. If TV sets are sold in a perfect, competitive market, calculate the annual number of TV sold. Show the losses in well-being each year that would result from a law limiting sales of TV sets to 100,000 per year. Show the effect on the price, marginal social benefit, and marginal social cost of TV sets, as well as the change in total surplus. Show the loss in efficiency that would result from a complete ban on the sales of TV sets. 3. The market equilibrium price for rice in Japan would be $6 per kilogram in the absence of government subsidies to rice production. However, the government sets the price of rice at $10 per kilogram and agrees to buy all rice produced by farmers at that price. Show how the subsidy program will result in losses in efficiency....
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