Consider the following demand and supply schedules for some agricultural commodity. $$\begin{array} { | c | l | c | }
\hline \text { Price } & \text { Quantity Supplied } & \text { Quantity Demanded } \
\hline \$ 10 & 300 & 1100 \
\hline \$ 30 & 500 & 900 \
\hline \$ 50 & 700 & 700 \
\hline \$ 70 & 900 & 500 \
\hline \$ 90 & 1100 & 300 \
\hline \$ 110 & 1300 & 100 \
\hline
\end{array}$$ TABLE 5- 2
-Refer to Table 5- 2.Consider the market- clearing equilibrium.If the government then imposes a production quota of 500 units,the deadweight loss that is created is equal to
A)$2000.
B)$3000.
C)$4000.
D)$5000.
E)$1000.

Question

Consider the following demand and supply schedules for some agricultural commodity. $$\begin{array} { | c | l | c | } 
\hline \text { Price } & \text { Quantity Supplied } & \text { Quantity Demanded } \
\hline \$ 10 & 300 & 1100 \
\hline \$ 30 & 500 & 900 \
\hline \$ 50 & 700 & 700 \
\hline \$ 70 & 900 & 500 \
\hline \$ 90 & 1100 & 300 \
\hline \$ 110 & 1300 & 100 \
\hline
\end{array}$$ TABLE 5- 2
-Refer to Table 5- 2.Consider the market- clearing equilibrium.If the government then imposes a production quota of 500 units,the deadweight loss that is created is equal to
A)$2000.
B)$3000.
C)$4000.
D)$5000.
E)$1000.

Quizplus · Accepted Answer

At equilibrium, quantity supplied and demanded is 700 units at $50. With a quota of 500 units, the price rises to $70. The deadweight loss is the area of the triangle formed by the reduction in quantity (200 units) and the difference in price ($20), which is 0.5 * 200 * 20 = $2000.

Consider the Following Demand and Supply Schedules for Some Agricultural