Suppose demand for a good is Q_D = 100 - P and supply is Q_S = -20 + P.Suppose that a nationwide quota (of 20)is enforced so that more can be used in a war effort.What is the consumer surplus? A)200 B)400 C)600 D)800

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Quizplus · Accepted Answer

The equilibrium without the quota is where QD = QS, which is 100 - P = -20 + P, solving gives P = 60, Q = 40. With a quota of 20, the price is P = 80. Consumer surplus is the area of the triangle with base (100 - 80) and height (40 - 20), which is 0.5 * 20 * 20 = 200.

Suppose Demand for a Good Is QD = 100 -

Suppose Demand for a Good Is Q_D = 100 -