Unformatted text preview: – 3(Ps* + 10) = 2Ps*. Then, the new equilibrium is Ps*=24, Pd*=34 and Q*=48. Moreover, the new consumer surplus is (50-34)*48/2 = 384 and now the producer surplus is 24*48/2 = 576. Finally, the deadweight loss is (60-48)*10/2 = 60. 4) a) True. When the demand curve is perfectly inelastic, after the imposition of a tax, the equilibrium quantity does not change, as a result, the deadweight loss is zero b) True. Analogously, when the supply curve is perfectly inelastic, after the imposition of a tax, the equilibrium quantity does not change, as a result, the deadweight loss is zero. c) False. As long as the ceiling price is above the equilibrium price, this policy will not affect the equilibrium price-quantity combination. Counter example: suppose that the supply and demand curves are the same as in Ex. 3), and that the government set the ceiling price at $1000....
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This note was uploaded on 04/19/2010 for the course ECON Econ 11 taught by Professor Mcdevitt during the Fall '07 term at UCLA.
- Fall '07