Question

# HOMEWORK ASSIGNMENT # 4

Due: Monday October 26th 2015

Total Possible Points: 20

1. Consider the market
for DVD players. Let the market
demand and supply curves be given as follows:

Demand: P = 90
– 2Q

Supply: P = 3Q

1. Under the
assumption of a competitive market, what are the equilibrium price and
quantity?
2. Now, assume the
government imposes a price ceiling of \$30. How many DVD players are
demanded and supplied at this price? Was a shortage created by this price
ceiling and, if so, how much is it?
3. Calculate the
price (PEX) that would eliminate the shortage from the
market.
4. Calculate the
consumer surplus, the producer surplus, and the deadweight loss.
5. Create a graph of
this market. Note clearly on the
graph the equilibrium quantity and price, the quantity demanded and the
quantity supplied under the price ceiling, the shortage, the price that
would eliminate the shortage from the market (PEX), the
producer and consumer surpluses, and the deadweight loss.
1. Assume the market demand curve for U.S.
automobiles is P = 15000-50Q and the supply curve is P = 50Q, where P is
the price of automobiles and Q is the quantity of automobiles.

1. What is the equilibrium price and quantity for
the U.S.
automobile market if there was no trade?
2. Now if the U.S. imports automobiles at a
price of \$5,000, how many automobiles will be produced domestically, how
many will be consumed domestically, and how many will be imported?
3. Now suppose the U.S. government places a \$1000
tariff on each imported automobile, how many will now be consumed
domestically, how many will be produced domestically, and how many will
be imported?
4. Calculate the amount of the tax revenue to the U.S.
government.
5. Calculate the amount of the deadweight loss.
6. Create a graph of this market. Note clearly on the graph the
equilibrium quantity and price if there was no trade, the quantity
produced and consumed domestically and the amount imported under the
world price, the quantity produced and consumed domestically and the
amount imported under the tariff, the tax revenue generated from the
tariff, and the deadweight loss created by the tariff.

will be deducted and show all your work including calculations. Also, the assignment is due in class on
Monday and late homework will not be accepted.

EC 308 Intermediate Microeconomics

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