Gobbet 7 - Market Efficiency - Calculate the deadweight...

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Gobbet #7: Market Efficiency (These problems are adapted from Callan and Thomas: Environmental Economics and Management , 2004) Consider the supply and demand schedules and the graph from Gobbet #4: PRICE (P) Quantity Demanded by Consumers (bottles/month) Quantity Supplied by Producers (bottles/month) $0.50 1,100 100 1.00 1,050 300 1.50 1,000 500 2.00 950 700 2.50 900 900 3.00 850 1,100 3.50 800 1,300 4.00 750 1,500 4.50 700 1,700 5.00 650 1,900 Calculate the consumer surplus , producer surplus and net economic surplus in this market. Say that the government imposed a price ceiling of $2.00 in the market. (That is, producers cannot charge more than $2.00 for bottled water.)
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Unformatted text preview: Calculate the deadweight loss associated with this price ceiling. What is the net benefit to society provided by the market when the price is $2.00? Now say that the government imposed a price floor of $3.00 in the market for bottled water. (That is, producers cannot charge less than $3.00 for bottled water.) Calculate the deadweight loss associated with this price floor. What is the net benefit to society provided by the market when the price is $3.00? 11.50 1,150 Demand= MB Quantity Price Supply = MC 0.25 2.50 900...
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This note was uploaded on 12/16/2009 for the course AEM 2500 taught by Professor Poe,g. during the Fall '07 term at Cornell University (Engineering School).

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