Gce Model Questions Vol1 2017 Economics Question 42

Practice objective / multiple choice question 42 from the 2017 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2017 Economics Objective / Multiple Choice Hard Difficulty
Question 42 GCE_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

The market for wheat is described by demand \( Q_d = 500 - 4P \) and supply \( Q_s = -100 + 6P \) (where \(P\) is price per tonne). The government introduces a price support of \(P = 120\) per tonne and purchases any surplus, storing it at a cost of £5 per tonne. Compute (a) the surplus quantity, (b) the total cost to the government (purchase plus storage), and (c) the dead‑weight loss arising from the policy.

Answer Options

Correct Answer A. Surplus = 600 t; total government cost = £75,000; dead‑weight loss = £18,000
B. Surplus = 500 t; total government cost = £65,000; dead‑weight loss = £15,000
C. Surplus = 550 t; total government cost = £70,000; dead‑weight loss = £16,500
D. Surplus = 700 t; total government cost = £85,000; dead‑weight loss = £20,000
Correct Answer
A
Correct Option:
Surplus = 600 t; total government cost = £75,000; dead‑weight loss = £18,000

About This Question

This is Gce Model Questions Vol1 2017 Economics Question 42. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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