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# sec_7 - MC = 0 5 Q What government price ceiling would...

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PAM 2000: Section Handout 7 TA : Romita Mukherjee April 7, 2009 (1) Suppose anyone with a driver’s license is capable of supplying one trip from the airport to the downtown business center on any given day. The long run supply curve of such trips is horizontal at p = \$50, which is the average cost of such trips. Suppose daily demand is Q = 1000 - 10 p. Calculate the change in consumer surplus, producer surplus and social welfare if the city government requires those people supplying such trips to possess a special license, and the government will only issue 300 licenses. (2) A monopoly faces an inverse demand curve of P = 100 - 2 Q . The marginal cost curve is

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Unformatted text preview: MC = 0 . 5 Q. What government price ceiling would represent optimal price regulation? 1 (3) The above ﬁgure shows supply and demand curves for milk. In an ef-fort to help farmers, the government passes a law that establishes a \$3 per gallon price support. To maintain the price support, government expenditures must equal (A) k + i (B) f + g + h + i + j (C) f + g + h + i + j + k (D) f + g + h + i + j + k + e (4) Suppose that market demand for a good is Q = 480-2 p . The marginal cost is MC = 2 Q . Calculate the deadweight loss resulting from a monopoly in this market. 2...
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