Question

In: Economics

Consider the market for hardcover books. Suppose that demand is Q = 325 – 8P and...

Consider the market for hardcover books. Suppose that demand is Q = 325 – 8P and supply is Q = -60 + 3P. The government sets a price ceiling at $50. Is it binding?

a. Yes, the price ceiling is binding

b. No, the price ceiling is nonbinding

Solutions

Expert Solution

As we know, price ceiling will be binding when it is set below the equilibrium price, therefore, in this case price ceiling is nonbinding because the equilibrium price is $35 (see attached picture for equilibrium price) and the price ceiling is set at $50, so the right answer is option B.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Consider the market for hardcover books. Suppose that demand is Q = 325 – 8P and...
Consider the market for hardcover books. Suppose that demand is Q = 325 – 8P and supply is Q = -60 + 3P. What would be the quantity demanded if a price ceiling is set at $50? a. 90 b. 45 c. 265 d. 165 e. None of these
Consider a perfectly competitive market where the market demand curve is given by Q = 76−8P...
Consider a perfectly competitive market where the market demand curve is given by Q = 76−8P and the market supply curve is given by Q=−8+4P. In the situations (d), determine the following items (i-viii) (d) A market with price ceiling C = 5. i) The quantity sold in the market. ii) The price that consumers pay (before all taxes/subsidies). iii) The price that producers receive (after all taxes/subsidies). iv) The range of possible consumer surplus values. v) The range of...
Consider a linear demand curve Q=160-8P. a) (4 pts) What is the price elasticity of demand...
Consider a linear demand curve Q=160-8P. a) (4 pts) What is the price elasticity of demand at p=5? Is it elastic, inelastic or unit elastic at this specific point?   b) (4 pts) At what price is demand unit-elastic (i.e. elasticity=-1)? Explain what does unit-elastic mean.
Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there...
Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there are 100 firms in the market each with a cost function c(q) = q2 + 1. (a) Determine the short-run equilibrium. (b) Is each firm making a positive profit? (c) Explain what will happen in the transition into the long-run equilibrium. (d) Determine the long-run equilibrium.
Suppose market demand and supply are given by Qd= 400-12P and Qs= -20 + 8P. If...
Suppose market demand and supply are given by Qd= 400-12P and Qs= -20 + 8P. If a price floor of $20.00 is imposed, there will be a surplus of 10 units. there will be neither a surplus or shortage. there will be a shortage of 16 units.   None of the above choices makes any sense in this case.
1. Consider the market for electricity. Suppose demand (in megawatt hours) is given by Q =...
1. Consider the market for electricity. Suppose demand (in megawatt hours) is given by Q = 42 − P and that the marginal private cost of generating electricity is $10 per megawatt hour (P is in the same units). Suppose further that smoke is generated in the production of electricity in direct proportion to the amount of electricity generated. The health damage from the smoke is $15 per megawatt hour generated. (What is meant here is that MC and MD...
The market demand for economics books is given by P = 12 − Q (a) Initially...
The market demand for economics books is given by P = 12 − Q (a) Initially there is only one firm (a monopolist) operating in this market. The total cost of producing books for the firm is T C = 2Q. How many books will he/she sell in this market? What will be market price? (b) Now, suppose a second firm enters the market. The two firms are now Cournot duopolists and they will produce quantities Q1 and Q2 respectively,...
Consider the market for electricity. Suppose demand (in megawatt hours) is given by Q=50-P and that...
Consider the market for electricity. Suppose demand (in megawatt hours) is given by Q=50-P and that the marginal private cost of generating electricity is $10 per megawatt hours. Suppose further that smoke is generated in the production of electricity in direct proportion to the amount of electricity generated. The health damage from smoke is $15 per megawatt hour generated. A.) Suppose the electricity is produced by competitive producers, without consideration of the externality. What price will be charged and how...
Consider a market for a good characterized by an inverse market demand P(Q) = 200−Q. There...
Consider a market for a good characterized by an inverse market demand P(Q) = 200−Q. There are two firms, firm 1 and firm 2, which produce a homogeneous output with a cost function C(q) =q2+ 2q+ 10. 1. What are the profits that each firm makes in this market? 2. Suppose an advertising consultant approaches firm 1 and offers to increase consumers’ value for the good by $10. He offers this in exchange for payment of $200. Should the firm...
Suppose the market demand for broccoli is given by Demand: Q = 1000 – 5P Where...
Suppose the market demand for broccoli is given by Demand: Q = 1000 – 5P Where Q is quantity measured in 100s of bushels and P is price per hundred bushels. The market supply is given by Supply: Q = 4P – 80 What is the equilibrium price and quantity? How much is spent on broccoli? What is consumer and producer surplus? Describe the impact of a $150 per hundred bushel price floor on broccoli. (How many bushels would be...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT