1. Explain what would happen to the equilibrium price and quantity of oranges if

Question

1. Explain what would happen to the equilibrium price and quantity of oranges if the supply of oranges increased while the demand for oranges decreased?

2. will a price ceiling always result in a reduction in efficiency?

3. describe how if a price-fixing game is repeated over and over, the cooperative outcome might be attained.

4. when an electronics company advertises on the local newspaper a 10% discount coupon, is this an example of price discrimination? why or why not?

5. how does the introductin of cognition into consumers choice between healthy and unhealthy food affect marginal utility per dollar and tthe quantity of healthy and unhealthy food consumed? assume utility is maximized.

Explanation / Answer

A price ceiling occurs when the government puts a legal limit on how high the price of a product can be. In order for a price ceiling to be effective, it must be set below the natural market equilibrium.

When a price ceiling is set, a shortage occurs. For the price that the ceiling is set at, there is more demand than there is at the equilibrium price. There is also less supply than there is at the equilibrium price, thus there is more quantity demanded than quantity supplied. An inefficiency occurs since at the price ceiling quantity supplied the marginal benefit exceeds the marginal cost. This inefficiency is equal to the deadweight welfare loss.

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