o 6/12/2016 11:55 PM 75/1006/4/2016 0720 PM B Gradebook Print Calculator Questio
ID: 1217270 • Letter: O
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o 6/12/2016 11:55 PM 75/1006/4/2016 0720 PM B Gradebook Print Calculator Question 4 of 20IncorrectIncorrect Sapting Learning Below is the market for hotels rooms in Cancun. Suppose the local govermment imposes a price floor of $300. Move the P line to reflect the price floor and use the graph to answer the questions 500 450 400 350 300 Shade the area of the deadweight loss and the size of this loss 250 Units Calculate the decrease in consumer surplus caused by the price floor 150 100 50 Units Demandli Incorrect Recall a price floor must be set above 0 100 200 300 400 500 600 700 800 900 1000 Quantity of rooms per night ulibnum to be effective The triangle of the dead weight loss is formed by the intersection of the supply demand curves the point on the demand curve at 0 (the price floor) and the point on the supply curve at the c the quantity of the market) Consumer surplus is the area under the demand curve and above price You must find the difference in consumer surplus before and after the orice floor 400 (the new amount exchanged in Previous Give Up & View Solution Try Again Next ExitExplanation / Answer
Equilibrium price = 250; equilibrium quantity = 500
new price 300,
DWL = 0.5 * (300-200) * (500-400) = 0.5*100*100 = 100 units
Consumer surplus = 0.5* 500*250 = 62500
New consumer surplus = 0.5* 400*200 = 40000
decrease in consumer surplus = 62500-4000 = 22500
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