100 suppose that a maximum price price ceiling is

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100. Suppose that a maximum price (price ceiling) is legislated. To calculate consumer surplus: A) integrate the area under the demand curve and above the free-market equilibrium price. B) integrate the area under the demand curve and above the ceiling price between zero quantity and the free-market equilibrium quantity. C) integrate the area under the demand curve and above the ceiling price between zero quantity and the quantity resulting from the price ceiling. D) integrate the area under the demand curve and above the supply curve between zero quantity and the quantity resulting from the price ceiling.
101. Integral calculus can be used to determine:
102. Suppose the demand and supply curves for units of university credits are given by the following equations: Q D = 5,000 – Q S = –1,000 + 4 P where Q D is the quantity of credits demanded, Q S is the quantity supplied, and P is the price charged for each unit in dollars. Suppose that the government wants to make education more accessible and therefore passes a regulation that says no university can charge more than $1,000 per credit. Calculate the deadweight loss associated with this price ceiling. 103. To calculate consumer surplus for the case when a quota is in place: P
104. Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is: Q D = 10 – 2.25 P and the market supply curve is: Page 32
Q S = –10 + 2.75 P where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. a. How will the quota influence the market price of water? The quantity of water sold? b. Calculate the deadweight loss resulting from the quota. Page 33
Answer Key
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45. C 46. B 47. D 48. A 49. C 50. B 51. C 52. A 53. A 54. A 55. A 56. B 57. a. To solve for the equilibrium price, set Q D = Q S . 200,000 – 50,000P = 90,000 P – 80,000. P = $2. At a price of $2, quantity demanded = 100,000. The demand choke price is $4, calculated by setting Q D equal to zero and solving for P . Consumer surplus is 0.5(4 – 2)(100,000) = $100,000. b. At a price of $2, quantity supplied = 100,000. The supply choke price is $0.89, calculated by setting Q S equal to zero and solving for P . Producer surplus is 0.5(2 – 0.89)(100,000) = $55,500. 58. a.

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