Under the demand and supply conditions given in Technical Problem 1, suppose that the mayor of NYC asks the city council to impose a price ceiling on bagels sold in NYC. If the ceiling price is set at $1.20 per bagel, answer the following questions (and assume that bagels are somehow rationed to the highest-valued consumers):a. Does the ceiling price cause a surplus or shortage of bagels in NYC? What is the amount of the surplus or shortage?b. Calculate consumer surplus under the price ceiling. Are bagel consumers in NYC better off with the mayor?s price ceiling on bagels? Explain carefully.c. Calculate producer surplus under the price ceiling. Are NYC bagel producers better off with the mayor?s price ceiling on bagels? Explain carefully.

Data From Problem 1

The market for bagels in New York City is perfectly competitive. In New York City, the daily demand for bagels is Q_d - 20,000 - 5,000P, which is graphed as D in the figure below. The industry supply of bagels in NYC is Q_s = -4,000 + 10,000P, which is graphed as S in the figure.

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4.00 3.00 2.40 S 2.00 1.80 1.20 1.00 D 5,000 10,000 15,000 20,000 Quantity of bagels (per day) Price of bagels (dollars)