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Assume market demand is given by: QD = 10 – P and market supply by: QS = P – 2. Let’s consider a situation where the government is seeking to control prices at above equilibrium levels, at PC = $7. In other words, the government is imposing a price floor, which prevents the market from clearing at a lower free market equilibrium price. The welfare loss created by such a policy is equal to how much? (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction).

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91725533

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