Gce Model Questions Vol1 2022 Economics Question 5

Practice objective / multiple choice question 5 from the 2022 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2022 Economics Objective / Multiple Choice Hard Difficulty
Question 5 GCE_MODEL_QUESTIONS_VOL1 • 2022 • ECONOMICS • objective

The market for wheat is described by the demand equation \(Q_{d}=120-2P\) and the supply equation \(Q_{s}=20+P\), where \(Q\) is thousand tonnes and \(P\) is the price in Naira per tonne. (a) Find the competitive equilibrium price and quantity. (b) The government sets a price floor of \(P = 50\) Naira per tonne and purchases any surplus at that price. Determine the quantity demanded, quantity supplied and the size of the surplus at the floor price. (c) Calculate the government's annual expenditure on wheat purchases. (d) Estimate the dead‑weight loss caused by the price floor (express your answer in thousand Naira, rounded to the nearest whole number).

Answer Options

A. Equilibrium price = 35 Naira, quantity = 50 k tonnes. At the floor: demand = 15 k, supply = 75 k, surplus = 60 k tonnes. Government spends 3,000 k Naira. Dead‑weight loss ≈ 500 k Naira.
B. Equilibrium price = 30 Naira, quantity = 60 k tonnes. At the floor: demand = 25 k, supply = 65 k, surplus = 40 k tonnes. Government spends 2,000 k Naira. Dead‑weight loss ≈ 350 k Naira.
Correct Answer C. Equilibrium price = 33.33 Naira, quantity = 53.33 k tonnes. At the floor: demand = 20 k, supply = 70 k, surplus = 50 k tonnes. Government spends 2,500 k Naira. Dead‑weight loss ≈ 417 k Naira.
D. Equilibrium price = 40 Naira, quantity = 40 k tonnes. At the floor: demand = 10 k, supply = 80 k, surplus = 70 k tonnes. Government spends 4,000 k Naira. Dead‑weight loss ≈ 600 k Naira.
Correct Answer
C
Correct Option:
Equilibrium price = 33.33 Naira, quantity = 53.33 k tonnes. At the floor: demand = 20 k, supply = 70 k, surplus = 50 k tonnes. Government spends 2,500 k Naira. Dead‑weight loss ≈ 417 k Naira.

About This Question

This is Gce Model Questions Vol1 2022 Economics Question 5. It is one of the objective questions from the 2022 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

View More Gce Model Questions Vol1 2022 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support