Production quota & subsidies
Intros
Lessons
- Subsidies and Production Quotas
- Two ways of government intervention
- Definition of Production Quota
- Definition of Subsidy
- Effects from Production Quotas
- Decrease in Supply
- Increase in price
- Underproduction
- Incentive to cheat and overproduce
- Effects from Subsidies
- Increase in supply
- Fall in price
- Increase in quantity produced
- Overproduction
Examples
Lessons
- Understanding Effects of Production Quotas
You are given the following information
Price (dollars per chair)
Quantity demanded (per chair)
Quantity supplied (per chair)
30
200
50
40
175
100
50
150
150
60
125
200
70
100
250
Graph the following information, and calculate the price, marginal cost, and quantity produced for chairs if the government sets a production quota of 125 chairs. - You are given the following information
Price (dollars per cup)
Quantity demanded (per cup)
Quantity supplied (per cup)
5
10
4
10
8
8
15
6
12
20
4
16
25
2
20
Graph the following information, and calculate the price, marginal cost, and quantity produced for cups if the government sets a production quota of 12 cups. - Understanding Effects of Subsidies
You are given the following information
Price (dollars per bag)
Quantity demanded (per bag)
Quantity supplied (per bag)
30
25
10.0
40
20
12.5
50
15
15.0
60
10
17.5
70
5
20.0
Graph the following information, and calculate the price, marginal cost, and quantity produced for chairs if the government gives a subsidy of $30 per bag. - You are given the following information
Price (dollars per pack)
Quantity demanded (per pack)
Quantity supplied (per pack)
9
22
4
18
19
10
27
16
16
36
13
22
45
10
28
Graph the following information, and calculate the price, marginal cost, and quantity produced for chairs if the government gives a subsidy of $18 per bag.