Suppose that there is a perfectly competitive market for a homogeneous good, and the market demand and
Question:
Suppose that there is a perfectly competitive market for a homogeneous good, and the market demand and supply curves are given by the following equations:
Demand: P = 500 - 3Q
Supply: P = 3Q
1. Find the equilibrium price and quantity in this market.
2. Calculate the consumer surplus at the equilibrium price and quantity.
3. Calculate the producer surplus at the equilibrium price and quantity.
4. Calculate the total surplus (consumer surplus + producer surplus) at the equilibrium price and quantity.
5. Suppose that the government implements a price floor at a price above the equilibrium price. How will this policy affect the quantity demanded, quantity supplied, consumer surplus, producer surplus, and total surplus?
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba