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Medical Questions
Your Question
A) Imagine the following situation: there is only one seller of Q with supply P=5+2Q and only one consumer with demand P=20-Q.
1. Price is regulated at P=7; compute consumer surplus (CS), producer surplus (PS) and market gains (MG)
2. Price is regulated at P=19; compute consumer surplus (CS), producer surplus (PS) and market gains (MG).
3. Show that MG can be maximized if these traders are left free to trade with each other.
Optional Questions:
4. Rent control resembles #1 above. Offer your critical analysis on rent control.
5. Minimum wage rate resembles #2 above. Offer your critical analysis on minimum wage.
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