Government Intervention Price ($) S 7 B 5 D E G 13 H D 60 100 140 Quantity Figure 1: Market for Breakfast Cereal (Boxes per kg) 1. Based on figure 1 above, answer the following questions. a) Due to a research report highlighting the benefits of eating breakfast cereal, the government imposes a price ceiling of $3 per kilogram. At this price what is the quantity that consumers demand and quantity that sellers are willing to supply? Explain the difference. (3 Marks) b) What are the changes in consumer surplus and producer surplus? What is the deadweight loss? (Hint use the areas from the diagram) (3 Marks) c) Overall, who are the winners as a result of the price ceiling? Who are the losers from this price ceiling? (3 Marks)Externalities and Public Goods 2. If a market has a negative production externality, explain how the social equilibrium is different to the private market equilibrium? What policy can the government use to correct the externality? (4 Marks) 3. What sort of good is characterised as being rival and non-excludable? Give an example. (2 marks )