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At 7 per hour 150 hours of labour are supplied and

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Unformatted text preview: rs of labour are supplied and 150 hours of labour are demanded unemployment =0. Page 13 of 33 ©Prep101 www.prep101.com/freestuff Use the following graph to answer question 21: Price Quota 7 S 6 5 4 3 D 5 10 15 20 25 Quantity Q21. If a regulatory agency restricts the production of an agricultural product to 10 units, a) b) c) d) e) There will be a surplus of 5 There will be a deadweight loss of 10 There will be a deadweight loss of 5 There will be a surplus of 10 There will be a deadweight loss of 25 Solution: c) There will be a deadweight loss of 5 With no quota, 15 units at the price of 5 per unit are produced. With quota, 10 units are produced and sold at the price of 6 per unit. Deadweight loss = (½)*(15 – 10)*(6 – 4) = 5 Q22. Charlie likes oranges and grapes. Oranges sell for $1.50 per pound and grapes sell for $2.50 per pound. Currently Charlie is in consumer equilibrium. If the price of oranges rises to $2.50 per pound, which of the following statements is true about the new consumer equilibrium? a) b) c) d) e) The marginal u...
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This note was uploaded on 08/26/2010 for the course ECON 208 taught by Professor Dickenson during the Fall '07 term at McGill.

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