Economy Assignment

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Academic Year:			2021/2022	Semester:				Spring 2022
Course Information
Course Code:		ECON251		Section:				F3
Instructor Name:		Maia Chiabrishvili
Assignment Information						Marks Earned
Assignment Type:		Assignment 2 – Group (15%)
Due Date:		5/04/2022  5 PM				/ 100
No of Questions:
Number of Pages:
Student Information:
Student	Name: …………………………………………						ID: ………………
Regulations:
This is a group assessment. Please, solve all the questions and show all your work.

 
 
 
 
 
 
 
 
 
 
 
 
MCQ (15 points)
 

1. A price ceiling
   1. has no effect.
   2. is set to protect producers.
   3. will cause a shortage.
   4. will cause a surplus.
   5. a and b are correct
   6. b and c are correct
2. A legal minimum price at which a good can be sold is a
   1. price floor.
   2. price stabilization.
   3. price support.
   4. price ceiling.
3. In the figure shown, a price ceiling is shown in

 

1. panel (a).
2. panel (b).
3. both panel (a) and panel (b).
4. neither panel (a) nor panel (b).

 
 
Problem 1 (15 points)
 
According to the graph shown, answer the questions:

1. If the government imposes a price floor of $6.00 in this market, what will be the result shortage or surplus? Calculate
2. According to the graph shown, at which price ceiling would exist?

 
 
 
 
Problem 2 (50 points)
Below is the graph for market of Good A
 
The demand and supply for bottled water are summarized by the graph below:
 
 

1. What are equilibrium price and equilibrium quantity on the market?

 

1. Calculate consumer surplus, producer surplus and total surplus at Equilibrium.

 

1. If the government imposes price floor of $1.75 in this market, would there be an excess supply or shortage? Calculate.

 

1. Shade the areas of consumer surplus, producer surplus and deadweight loss after setting the floor at $1.75.

 

1. Calculate the value of producer surplus after the price floor is imposed.
2. Assume, now, that the government imposes a price ceiling of $0.50. Would there be an effect on the market (excess, shortage or nothing happens)? Explain.

 
 
 
 
Essay (20 points)
What happens to producer surplus when a price ceiling (below the equilibrium price) is enacted? What happens to consumer surplus? Will there be a shortage or a surplus in the new equilibrium?
What are the negative consequences of imposing price ceiling and price floor?