Ag Econ 41
Fifth Quiz, 30 points
Due: October 6, 2011
Name ______KEY____________________
Section/Time ________________________
Part 1
The demand and supply of daffodils is given by the following selected data.
P
Qd
0
12
2
10
4
8
6
6
8
4
10
2
P
Qs
0
0
3
3
5
5
7
7
10
10
12
12
12
0
Specify the price and quantity of daffodils when the market clears (at equilibrium) on the
graph.
Attach a graph of supply and demand curves for daffodils and show the market clearing
price and quantity. (Graph paper or computer generated – 2 pts)
Show the producer surplus and the consumer surplus on the graph and list the dollar
value of each here. CS = $18 PS = $18
Part 2
Suppose the government imposes a price floor (support) of $7.50 on daffodils. Show the
price floor on a separate graph from the one for Part 1.
What legal quantity is actually transacted at the price floor? 4.5
What surplus quantity is likely to result? 3
What is the amount of producer surplus, consumer surplus and deadweight loss with the
price floor? PS = $23.625 CS = $10.125 DWL = $2.25
TURN QUIZ OVER
1
Part 3
Begin with the original demand and supply.
Suppose the government imposed a tax of $2.00 on daffodils and it is paid by the seller.
What is the new price that the consumer pays? Price that the producer receives?
Quantity transacted? Pc = $7
Pp = $5
Q=5
Show the original supply and demand curves and the impact of the tax on a separate
graph from Parts 1 & 2.
What is the change in producer surplus due to the tax? The change in consumer surplus?
List amounts here and show on the Part 3 graph. ∆ CS = $5.5
∆ PS = $5.5
What is the revenue the government gains from the tax? $10
How much is the deadweight loss? DWL = $1
Each part is value at nine points each
2
3
4
5