ECON 200

10-Pointer: CS, PS and DWL

Name: …………………………...

1. Using the figure above answer the following questions

a. What are the equilibrium price and quantity?
i. Equilibrium Price = ……...
ii. Equilibrium Quantity = …….

b. At equilibrium, if Consumer Surplus is represented by the area of geometric

shapes A, B, and C (i.e., CS = A + B + C), then (do not calculate a numeric value)
i. Producer Surplus = ……………………….
ii. Deadweight Loss = ……………………….
iii. Total Surplus = …………………………………………
iv. What can you say about the total surplus at the equilibrium?

2. Suppose the government intervenes in the market by imposing a price ceiling of $20.
Find (do not calculate the numeric value)
a. Consumer Surplus = …………………
b. Producer Surplus = ……………………
c. Deadweight Loss = …………………….
d. What can you say about the transfer of the surplus?

1
 3. Suppose the government intervenes in the market by imposing a price floor at 40. Find
(do not calculate using the numbers, just label surpluses or losses using the letter in the
geometric shape)
a. Consumer Surplus = …………………
b. Producer Surplus = ……………………
c. Deadweight Loss = …………………….
d. What can you say about the transfer of the surplus?

4. Like price controls, quantity controls can have a loss of economic surplus. Government
or non-government agencies can control the quantity of goods and services produced.
Let’s take the example of the oil market. To address climate change, the government
wants to reduce both the level of consumption and production of fossil fuels. If the
government restricts the number of goods bought or sold at Q (in this case the fossil
fuels), label the consumer and producer surpluses and deadweight loss in the following
figure. Be sure to provide your reasoning.