Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
Problem 3PA
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Question
c & d
Detailed answers
![Consider a market where demand and supply satisfy the following equations
QD = 12 – 2 P,
Qs = 2P.
a) Find the current equilibrium price and quantity.
(4 marks)e
b) What is the total producer surplus if the market is in equilibrium?
(4 marks)e
The government is considering a minimum price policy to increase producer surplus.
c) Explain by means of graphs how the introduction of a price floor can increase
producer surplus.
(6 marks)
d) Find the (optimal) price floor that maximizes producer surplus.
(6 marks)d](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc97d4ce1-7716-4e3e-ae05-b29cb2d5a551%2F78cddb28-56f5-45fb-9153-be5b40932a6f%2F2d5gcah_processed.png&w=3840&q=75)
Transcribed Image Text:Consider a market where demand and supply satisfy the following equations
QD = 12 – 2 P,
Qs = 2P.
a) Find the current equilibrium price and quantity.
(4 marks)e
b) What is the total producer surplus if the market is in equilibrium?
(4 marks)e
The government is considering a minimum price policy to increase producer surplus.
c) Explain by means of graphs how the introduction of a price floor can increase
producer surplus.
(6 marks)
d) Find the (optimal) price floor that maximizes producer surplus.
(6 marks)d
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