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Suppose the supply curve for a good is totally inelastic. If the government imposed a price ceiling below the market-clearing level, would a deadweight loss result? Explain.
While the supply curve is totally inelastic, the imposition of an effective price ceiling transfers all loss in manufacturer surplus to consumers. Consumer surplus rises by the variation among the market-clearing price and the price ceiling times the market-clearing quantity. Consumers capture all reduces in total revenue. Hence, no deadweight loss occurs.
Question : (a) A company wants to purchase a plant for its expanding operations. The desired plant is available at Rs 300,000 in cash. Alternatively, the company has the option
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