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The market for college hockey players is characterized by the following supply and demand curves, where Q is the number of athletes and P is the weekly wage in excess of their scholarship payments:
QD = 1600 - 20P, QS = -900 + 30P
(a) Suppose there is a completely free market. What is the equilibrium weekly wage? How many athletes are hired?
(b) Now suppose that the National Collegiate Athletic Association (NCAA) steps in and decides to crack down on payments to players. The NCAA is bothered not by the existence of these payments, but by their levels, so the NCAA restricts players to be paid no more than $35/week above the scholarship payment. How many athletes are now hired?
(c) What is the change in producer surplus (i.e. the players' surplus) as a result of the price control?
(d) How much do schools now spend on players in comparison to the free market equilibrium?
(e) What is the deadweight loss of the price ceiling?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9482379

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