Gce Model Questions Vol1 2023 Economics Question 10

Practice objective / multiple choice question 10 from the 2023 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2023 Economics Objective / Multiple Choice Hard Difficulty
Question 10 GCE_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • objective

In the wheat market the demand curve is \(Q_d = 500 - 2P\) and the original supply curve is \(Q_s = 100 + P\), where \(P\) is the price in dollars per ton and \(Q\) is quantity in million tons. The government introduces a subsidy of \(\$20\) per ton paid to producers. (i) Determine the new equilibrium consumer price, producer price and quantity. (ii) Calculate the change in consumer surplus, producer surplus and the government's total outlay. (iii) Estimate the dead‑weight loss resulting from the subsidy.

Answer Options

A. Consumer price ≈ $130.5, producer price ≈ $150.5, quantity ≈ 255 million tons; CS ↑ ≈ $1.8 bn, PS ↑ ≈ $3.5 bn; government outlay ≈ $5.10 bn; dead‑weight loss ≈ $0.15 bn
Correct Answer B. Consumer price ≈ $126.7, producer price ≈ $146.7, quantity ≈ 247 million tons; CS ↑ ≈ $1.6 bn, PS ↑ ≈ $3.2 bn; government outlay ≈ $4.93 bn; dead‑weight loss ≈ $0.13 bn
C. Consumer price ≈ $125.0, producer price ≈ $145.0, quantity ≈ 250 million tons; CS ↑ ≈ $1.5 bn, PS ↑ ≈ $3.1 bn; government outlay ≈ $5.00 bn; dead‑weight loss ≈ $0.14 bn
D. Consumer price ≈ $120.0, producer price ≈ $140.0, quantity ≈ 240 million tons; CS ↑ ≈ $1.4 bn, PS ↑ ≈ $3.0 bn; government outlay ≈ $4.80 bn; dead‑weight loss ≈ $0.12 bn
Correct Answer
B
Correct Option:
Consumer price ≈ $126.7, producer price ≈ $146.7, quantity ≈ 247 million tons; CS ↑ ≈ $1.6 bn, PS ↑ ≈ $3.2 bn; government outlay ≈ $4.93 bn; dead‑weight loss ≈ $0.13 bn

About This Question

This is Gce Model Questions Vol1 2023 Economics Question 10. It is one of the objective questions from the 2023 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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