QUESTION 11

This question is based on a true story and explores a policy instituted by the government of the province of Quebec in Canada to guarantee affordable daycare to parents. Assume that the daily market demand and supply for daycare in the province of Quebec are given by:

• Demand:P = 90 - 0.0002Q_D
• Supply:P= 15 + 0.0001Q_S

wherePis the (Canadian dollar) price charged per day for a single child who is put in a daycare facility, andQis the total number of children put in daycare each day.

A government official proposes that parents should not have to pay more than $5 per day per child for daycare. In other words, the proposal is to impose aprice ceiling of P= $5on the market for daycare. The demand and supply curves are the same as above. What will be the quantity of daycare supplied with this $5 price ceiling?

A) Q = 0

B) Q =100,000

C) Q = 250,000

D) Q = 400,000

E) Impossible to tell