Exam 4: Economic Efficiency, Government Price Setting, and Taxes

The additional benefit to a consumer from consuming one more unit of a good or service is the marginal benefit.

Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are responsible for paying this tax. How would the imposition of the tax be illustrated in a graph?

Table 4-13 -Refer to Table 4-13. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. What are the equilibrium price and quantity (in thousands) for Aunt Maud's Lotion?

Table 4-6 -Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the price of polo shirts increases from $15 to $20,

Government intervention in agriculture began in the United States in the 1890s.

Figure 4-19 -Refer to Figure 4-19. The figure above illustrates the markets for two goods, Good X and Good Y. Suppose an identical dollar tax is imposed on sellers in each market. a. Compare the consumer burden and producer burden in each market. Illustrate your answer graphically. b. If the goal of the government is to raise revenue with minimum impact to quantity consumed, in which market should the tax be imposed? c. If the goal of the government is to discourage consumption, in which market should the tax be imposed?

Government intervention in agricultural markets in the U.S. began in the

Figure 4-14 Figure 4-14 shows the market for taxi rides. The following question(s) are based on this figure. -Refer to Figure 4-14. To legally drive a taxicab in New York City, you must have a medallion issued by the city government. Assume that only 13,200 medallions have been issued. Let's also assume this puts an absolute limit on the number of taxi rides that can be supplied in New York City on any day, because no one breaks the law by driving a taxi without a medallion. Assume as well that each taxi provides 6 trips per day. In that case, the quantity of taxi rides supplied is 79,200 (or 6 rides per taxi × 13,200 taxis). This is shown in the diagram with a vertical line at this quantity. Assume that there are no government controls on the prices that drivers can charge for rides. a. What would the equilibrium price and quantity be in this market if there was no medallion requirement? b. If there was no medallion requirement, indicate the area that represents consumer surplus. c. If there was no medallion requirement, indicate the area that represents producer surplus. d. If there was no medallion requirement, indicate the area that represents economic surplus. e. What are the price and quantity with the medallion requirement? f. With a medallion requirement in place, what area represents consumer surplus? g. With a medallion requirement in place, what area represents producer surplus? h. With a medallion requirement in place, what area represents the deadweight loss? i. Based on your answers to parts (c) and (g), are taxicab drivers better off with the medallion requirement for taxicabs than without? j. Are consumers better off with or without the medallion requirement for taxicabs?

What is the difference between scarcity and a shortage?

The total amount of producer surplus in a market is equal to the area above the market supply curve and below the market price.

Figure 4-5 -Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3, what changes in the market would result in an economically efficient output?

Table 4-8 Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-8. If a minimum wage of $10.00 is mandated there will be a

Which of the following describes the difference between "scarcity" and "shortage"?

Table 4-7 Table 4-7 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-7. Suppose that the quantity of labor supplied increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Which of the following is a result of imposing a rent ceiling?

If the price of hairspray is represented by P in the equation P = 10 - 0.2 Q^D, then the corresponding quantity of hairspray demanded is represented by the demand equation

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

In the economic sense, almost everything is scarce. ________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Figure 4-18 Figure 4-18 shows the market for cigarettes. The government plans to impose a per-unit tax in this market. -Refer to Figure 4-18. How much of the tax is paid by producers?

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of the deadweight loss after the imposition of the price floor?