Quiz 2:

Q1: Demand is given by P=75-Q and supply is given by P=Q+5. What
would be the dead weight loss if a price floor of 55 is in place?

A1: The first thing we need to do is make sure that this floor is
effective. Without the price floor the equilibrium is where75-Q=Q+5 or
70=Q so Qe = 35 and thus Pe = 40.

As Pe< the price floor this policy is effective. At a price of 55,
quantity demanded is given by 55=75-Q or Q=20. The cost to the sellers for
20 units is 20+5 = 25 (the height of the suypply curve) Teh dead
weight loss is thus .5*(55-25)*(35-20)=$225.

Q2: If f(x,y)=x^{2}y^{3}+2x find dy/dx.

A: dy/dx =- *d*f/*d*x / *d*f/*d*y* =*
- (2xy^{3}+2)/(3x^{2}y^{2})