DIS 15 Handout - Aniko Oery University of California,...

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Unformatted text preview: Aniko Oery University of California, Berkeley Section 15: Government interventions (continued) Econ 100A, MICRO-ECONOMIC ANALYSIS, Spring 2010 1 Practice Problems from the 3rd edition of the textbook Microeconomics by Bersanko and Braeutigam 1. Consider a perfectly competitive market in which the market demand curve is given by Q d = 20- 2 P d and the market supply curve is given by Q s = 2 P s . a) Find the equilibrium price and quantity in the absence of government intervention. b) Suppose the government imposes a price ceiling of $ 3 per unit. How much is supplied? c) Suppose, as an alternative, the government imposes a production quota limiting the quantity supplied to 6 units. What is the market price under this type of intervention? Is the quantity supplied under the price ceiling greater than, less than, or the same as the quantity under the production quota? d) Assuming that under price controls rationing is as efficient as possible and under the quota, the allocation is as efficient as possible, under which program is the deadweight loss larger: the...
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This note was uploaded on 01/19/2011 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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DIS 15 Handout - Aniko Oery University of California,...

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