26. MC Qu. 135 Consider a market for fish whose market demand and... $80. $40. 2

Question

26.

MC Qu. 135 Consider a market for fish whose market demand and...

$80.

$40.

27.

MC Qu. 136 Consider a market for fish whose market demand and...

$140. $110.

$80.

$40.

27.

value:
3.80 points

MC Qu. 136 Consider a market for fish whose market demand and...

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The government decides to impose a price floor of $50 per ton. What would be the resulting market distortion? Shortage of 120 tons of fish Shortage of 175 tons of fish Surplus of 120 tons of fish There would be no market distortion references

Explanation / Answer

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Suppose that the free market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If the minimum wage were set at $2.50 an hour, how many people would not be able to find work?
A) 30
B) 20
C) 10
D) 0

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The government decides to impose a price floor of $50 per ton. What would be the resulting market distortion?

A) Shortage of 120 tons of fish.
B) Shortage of 175 tons of fish.
C) Surplus of 120 tons of fish.
D) There would be no market distortion

.(1)
Where did you get stuck? You plug in the given value and do the math:
Qs = 5 * 2.50 = 12.50
Qd = 30 - 5 * 2.50 = 17.50
That gives you 12.5 jobs, but 17.5 people looking for jobs, so we need 5 more workers.
Unfortunately, this is not one of the given choices.

(2) First, set the supply equal to the demand.
300 - 2.5 P = -20 + 1.5 P
Solve for P; there's your free-market equilibrium price. Use that to find the amount.

Second, compute the supply/demand differential for P=50 (as we did in problem 1).
That difference is the market distortion.

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