Gce Model Questions Vol1 2021 Economics Question 30

Practice objective / multiple choice question 30 from the 2021 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2021 Economics Objective / Multiple Choice Hard Difficulty
Question 30 GCE_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • objective

The government sets a price floor of £80 per tonne for wheat. The market demand is \( Q_{d}=500-4P \) and the market supply is \( Q_{s}= -100 + 6P \). The floor is enforced by the government purchasing any excess supply at the floor price, financed by a lump‑sum tax.\n\nDetermine:\n(i) the quantities demanded and supplied at the floor price and the size of the excess supply;\n(ii) the total cost to the government of purchasing the excess;\n(iii) the consumer surplus, producer surplus and dead‑weight loss (rounded to the nearest pound);\n(iv) the net change in total welfare relative to the free‑market equilibrium (in £).

Answer Options

Correct Answer A. Qd=180, Qs=380, excess=200; government cost £16,000; CS £4,050, PS £12,033, DWL £800; net welfare falls by about £14,000
B. Qd=180, Qs=380, excess=200; government cost £15,000; CS £4,050, PS £12,033, DWL £900; net welfare falls by about £13,500
C. Qd=160, Qs=400, excess=240; government cost £19,200; CS £4,200, PS £12,500, DWL £600; net welfare falls by about £15,000
D. Qd=200, Qs=360, excess=160; government cost £12,800; CS £3,800, PS £11,200, DWL £1,000; net welfare falls by about £13,000
Correct Answer
A
Correct Option:
Qd=180, Qs=380, excess=200; government cost £16,000; CS £4,050, PS £12,033, DWL £800; net welfare falls by about £14,000

About This Question

This is Gce Model Questions Vol1 2021 Economics Question 30. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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