$(12$ points total, $2$ points each$)$ Producer and consumer surplus. Suppose the demand$(12$ points total, $2$ points each$)$ Producer and consumer surplus. Suppose the demand

for heating oil in a closed market can be described as $P=5-0\mathrm{.}4Q,$ and the supply curve for

heating oil can be described as $P=2+0\mathrm{.}2Q,$ where $P$ is the price in $\frac{\text{\$}}{g}$ allon, and $Q$ is

gallons of heating oil per day.

a$.$ What is the equilibrium price and quantity of heating oil?

b$.$ Assume a price ceiling of $$2.$ What is the resulting shortage or surplus? $($Hint:

remember I$\text{'}$m asking for the shortage or surplus of heating oil, not

consumer$/$producer surplus!$)$

c$.$ Assume a price floor of $$2.$ What is the resulting shortage or surplus?

d$.$ What is the consumer$/$producer surplus with no price ceiling?

e$.$ What is the consumer$/$producer surplus with the price ceiling of $$2?$ Hint:

remember this is a closed market, so whatever producers are willing to provide at

a price of $$2$ is the amount available in the market.

f$.$ Now, assume a quota of $4$ gallons of heating oil is imposed $($assume no price

ceiling$).$ What is producer$/$consumer surplus with the quota? What is the

deadweight loss, and what is the value of the "wedge."

for heating oil in a closed market can be described as P$=5-0\mathrm{.}4$Q$,$ and the supply curve for

heating oil can be described as P$=2+0\mathrm{.}2$Q$,$ where P is the price in $$/$gallon$,$ and Q is

gallons of heating oil per day.

a$.$ What is the equilibrium price and quantity of heating oil?

b$.$ Assume a price ceiling of $$2.$ What is the resulting shortage or surplus? $($Hint:

remember I$$m asking for the shortage or surplus of heating oil, not

consumer$/$producer surplus!$)$

c$.$ Assume a price floor of $$2.$ What is the resulting shortage or surplus?

d$.$ What is the consumer$/$producer surplus with no price ceiling?

e$.$ What is the consumer$/$producer surplus with the price ceiling of $$2?$ Hint:

remember this is a closed market, so whatever producers are willing to provide at

a price of $$2$ is the amount available in the market.

f$.$ Now, assume a quota of $4$ gallons of heating oil is imposed $($assume no price

ceiling$).$ What is producer$/$consumer surplus with the quota? What is the

deadweight loss, and what is the value of the $$wedge$.$