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Suppose the equilibrium price of haircuts is $2 per haircut A new law sets the price at $5 per haircut and requires certain demanders to buy as many haircuts


Suppose the equilibrium price of haircuts is $2 per haircut. A new law sets the price at $5 per haircut and requires certain demanders to buy as many haircuts as suppliers want to sell at that price.
a. Illustrate the smallest possible deadweight loss from this program, and justify your answer.
b. Explain why the actual deadweight loss is almost surely greater than what you calculated in part (a).

May 16 2020 View more View Less

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