Remember that a correctly labeled graph requires that you label all axes, curves, and equilibrium point values. The word "calculate" means you must show your work.

Assume the market for jet planes is in equilibrium.

(a) Draw a correctly labeled supply and demand graph for jet planes. Label the equilibrium price Peand the equilibrium quantity Qe.

(b) Assume the government institutes an effective price ceiling on jet planes. On your graph from part (a), show each of the following after the tax has been implemented.

(i) The equilibrium price labeled Pc

(ii) The quantity demanded labeled Qdcand quantity supplied labeled Qsc

(iii) The area representing the new producer surplus, shaded completely

(iv) The area representing deadweight loss, labeled DWL

(c) Assume that the price ceiling is set at 10 million dollars, that the quantity supplied at this price is 2 thousand jet planes, and that the minimum price on the supply curve is 2 million dollars. Calculate the area of producer surplus.

(d) Will the quantity of jet planes purchased increase or decrease as a result of the price ceiling? Explain.

(e) Is the market for jet planes more, less, or equally allocatively efficient after the price ceiling is instituted? Explain.