The government imposes a binding maximum quantity of 500 tons on the perfectly competitive market for apples. Do we have a deadweight loss? why? Hints: 1) What does a biding quantity mean? 2) Focus on reasons why total surplus (not CS, PS) could be lower than efficient total surplus.
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Suppose that the market for corn is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as P = 10 - Q_D; the supply curve can be expressed as P = 0.25Q_S. Quantity is expressed in millions of bushels. Now suppose that the federal government imposes a price floor of $3 per bushel of corn. What is the deadweight loss (per million bushels) associated with the price floor when the most efficient producers are active? What is the deadweight loss (per million bushels) associated with the price floor when the least efficient producers are active?
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