Suppose the supply of coal is perfectly inelastic, and the price ...

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Suppose the supply of coal is perfectly inelastic, and the price elasticity of demand for coal is -0.4.
 
  If the government imposes a binding price ceiling for coal at a price that is 20 percent below the market equilibrium price, what is the impact of this policy on the market quantity? A) Excess demand equals 80 percent of the market equilibrium quantity
  B) Excess demand equals 8 percent of the market equilibrium quantity
  C) Excess demand equals 16 percent of the market equilibrium quantity
  D) The policy does not affect the market quantity

Question 2

Refer to Scenario 18.1. It would be acceptable to both parties to have the fishermen pay the factory
 
  A) 0 to install a filter.
  B) 500 to install a filter.
  C) 4,000 to install a filter.
  D) 6,000 to install a filter.
  E) any amount greater than 4,000 and less than 6,000 to install the filter and make both parties better off.

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Answer to Question 1

B

Answer to Question 2

E