Assume that a competitive cell phone market has a demand curve
described by the equation P = 50 (2.5)Q and a supply curve
described by P = 5 + (2)Q.
2(a). What are the consumer and producer surpluses in this
2(b). What is the deadweight loss (DWL) if a price ceiling is
set at Pmax = $15?
2(c). Does either the consumer or producer surplus increase with
the price ceiling imposed in 2(b)? Be sure to show your
calculations and reasoning.