Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 60 - Q ^ { d }$ ; the supply curve can be expressed as $P = 0.5 Q ^ { s }$ . Quantity is expressed in millions of boxes per month. Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month. What are the new amount traded and the price in this market?
A) Q = 40; P = 20
B) Q = 20; P = 40
C) Q = 30; P = 30
D) Q = 30; P = 15

Question

Quizplus · Accepted Answer

With a production quota of 30 million boxes, the quantity traded is 30. Substituting $Q = 30$ into the demand equation $P = 60 - Q$, we get $P = 30$.

Suppose That the Market for Cigarettes Is Initially in Equilibrium P=60−QdP = 60 - Q ^ { d }P=60−Qd

Suppose That the Market for Cigarettes Is Initially in Equilibrium $P = 60 - Q ^ { d }$