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Academic Year: |
2021/2022 |
Semester: |
Spring 2022 |
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Course Information |
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Course Code: |
ECON251 |
Section: |
F3 |
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Instructor Name: |
Maia Chiabrishvili |
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Assignment Information |
Marks Earned |
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Assignment Type: |
Assignment 2 – Group (15%) |
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Due Date: |
5/04/2022 5 PM |
/ 100 |
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No of Questions: |
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Number of Pages: |
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Student Information: |
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Student |
Name: ………………………………………… |
ID: ……………… |
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Regulations: |
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This is a group assessment. Please, solve all the questions and show all your work. |
MCQ (15 points)
1. A price ceiling
a. has no effect.
b. is set to protect producers.
c. will cause a shortage.
d. will cause a surplus.
e. a and b are correct
f. b and c are correct
2. A legal minimum price at which a good can be sold is a
a. price floor.
b. price stabilization.
c. price support.
d. price ceiling.
3. In the figure shown, a price ceiling is shown in
a. panel (a).
b. panel (b).
c. both panel (a) and panel (b).
d. neither panel (a) nor panel (b).
Problem 1 (15 points)
According to the graph shown, answer the questions:
1. If the government imposes a price floor of $6.00 in this market, what will be the result shortage or surplus? Calculate
2. According to the graph shown, at which price ceiling would exist?
Problem 2 (50 points)
Below is the graph for market of Good A
The demand and supply for bottled water are summarized by the graph below:
a) What are equilibrium price and equilibrium quantity on the market?
b) Calculate consumer surplus, producer surplus and total surplus at Equilibrium.
c) If the government imposes price floor of $1.75 in this market, would there be an excess supply or shortage? Calculate.
d) Shade the areas of consumer surplus, producer surplus and deadweight loss after setting the floor at $1.75.
e) Calculate the value of producer surplus after the price floor is imposed.
f) Assume, now, that the government imposes a price ceiling of $0.50. Would there be an effect on the market (excess, shortage or nothing happens)? Explain.
Essay (20 points)
What happens to producer surplus when a price ceiling (below the equilibrium price) is enacted? What happens to consumer surplus? Will there be a shortage or a surplus in the new equilibrium?
What are the negative consequences of imposing price ceiling and price floor?