Suppose the market for rice is perfectly competitive. The market demand function is

Q =102P(orP=5 ).

The market supply function is

Q =3p10(orP=1(Q +10)).

a)What is the equilibrium price and quantity in the market for rice? (2 marks)

b)What is the consumer surplus and the producer surplus in this market? (2 marks)

c)Suppose the government tries to help the producers by setting a price floor at 4.5. What would be the quantity transacted in the market? (2 marks)

d)What is the deadweight loss caused by the price floor? (2 marks)

Now, suppose there is no price control and the market demand remains the same, but the supply of rice is monopolized by one large firm with

= 1 ( + 10). 3

e)What is the profit-maximizing price and quantity for the monopolist? (2 mark)

f)Can the government use price control to help the market reach an efficient outcome? Please explain the reason. (Assume that the monopolist earns positive profit if he produces at the market efficient quantity.) (2 marks)

g)Suppose the monopolist engages in first-degree (perfect) price discrimination. What will the consumer surplus and the producer surplus be? (3 marks)