(a) Draw a correctly labeled supply and demand graph for jet planes. Label the equilibrium price P_e and the equilibrium quantity Q_e.

(b) Assume the government institutes an effective price ceiling on jet planes. On your graph from part (a), show each of the following after the price ceiling has been implemented.

(i) The equilibrium price labeled P_c

(ii) The quantity demanded labeled Q_dc and quantity supplied labeled Q_sc

(iii) The area representing the new producer surplus, shaded completely

(iv) The area representing deadweight loss, labeled DWL

(c) Assume that the price ceiling is set at 10 million dollars, that the quantity supplied at this price is 2 thousand jet planes, and that the minimum price on the supply curve is 2 million dollars. Calculate the area of producer surplus.

(d) Will the quantity of jet planes purchased increase or decrease as a result of the price ceiling? Explain.

(e) Is the market for jet planes more, less, or equally allocatively efficient after the price ceiling is instituted? Explain.

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