Suppose that the supply and demand curves for the designer purse in Problem 1 are given as
Question:
a. Calculate the new consumer and producer surplus values after this intervention.
b. What is the deadweight loss associated with the quota?
c. Suppose the local government institutes a price regulation (floor) at $591 instead of the quota. Calculate the new consumer and producer surplus values after this intervention.
d. What is the deadweight loss associated with the price floor?
e. Comparing your answers for the price floor in parts (c) and (d) to your solutions for the quota in parts (a) and (b), what can you deduce about the relationship between price and quantity public policy instruments in this case?
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a At a quantity on 30 the equilibrium trading price is P 600 0 01...View the full answer
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Related Book For 
Microeconomics
ISBN: 9781464146978
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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