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Consider the following information about the market for Bayer Heroin-Hydrochloride: P = 10.525 - 0.1QD P= 3.25+1.4QS

a. What is the equilibrium market price for heroin?

b. What quantity of heroin is sold at market price? What quantity is demanded?

c. What is the producer surplus at market price?

d. What is the consumer surplus at market price?

e. The government is shocked to learn some consumers are not buying heroin for any medicinal usage, but in fact they are buying it for RECREATIONAL USAGE!!!! (Add your own scary background music). As such, they mandate that the price of heroin cannot be lower than 7.15 per bottle, to curb abuse.

f. What is the quantity demanded for heroin at the new legally-mandated price?

g. What is the quantity supplied for heroin at the new legally-mandated price?

h. What is the deadweight loss caused by the new legally-mandated price?

i. What changes in surplus occur due to the new legally-mandated price?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9684705

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