To halt the continued rise in the price of gasoline, the government implements a price ceiling, where the price of gas is not allowed to rise above $3 a gallon. If the price ceiling was not in place, the price of gas would equal $3.75 a gallon. The price ceiling has what effect on the sum of producer and consumer surplus in the market:

Consider a market where demand and supply satisfy the following equations       Q­D = 12 – 2 P,       QS = 2P. The government is considering a minimum price policy to increase producer surplus. Explain by means of graphs how the introduction of a price floor can increase producer surplus. Find the (optimal) price floor that maximizes producer surplus.

Suppose the market price of wheat is $7 a bushel and a price ceiling is set at $9 a bushel. What is the impact of this price ceiling?

Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes.   First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $50 per fan.   First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer…