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Consider a market where demand is: P = 6 - Q and supply is S: P = Q.

1. Equilibrium quantity Qe is

a. 2

b. 3

c. 4

d. 5

2. Equilibrium price Pe is

a. $2

b. $3

c. $4

d. $5

3. Consumer surplus CS is

a. $0.5

b. $4.5

c. $12.5

d. $16.5

4. Producer surplus PS is

a. $0.5

b. $4.5

c. $12.5

d. $16.5

5. Total surplus TS is

a. $5

b. $7

c. $8

d. $9

Construct a budget neutral subsidy in the above market.

6. Quantity Q' is

a. 2

b. 3

c. 4

d. 5

7. Post-subsidy producer price Pp is

a. $2

b. $3

c. $4

d. $5

8. Consumer surplus CS is

a. $0.5

b. $4.5

c. $12.5

d. $16.5

9. Producer surplus PS is

a. $0.5

b. $4.5

c. $12.5

d. $16.5

10. Total surplus TS is (do not forget to account for the subsidy expenditure SE)

a. $5

b. $7

c. $8

d. $9

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9471608

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