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

Using a supply and demand graph, illustrate the effect of the addition of a $10.00 unit tax on digital cameras, where the entire tax burden falls on the seller.Assume the equilibrium price before the tax is $125 and the equilibrium quantity is 50,000.What happens to the price and quantity after the tax is implemented?

Figure 4.5 Figure 4.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4.5.What is the value of consumer surplus after the imposition of the ceiling?

Marginal cost is

The sum of consumer surplus and producer surplus is called economic surplus.

Figure 4.10 -Refer to Figure 4.10.Suppose the market is initially in equilibrium at price P₀ and then the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax?

Figure 4.1 Figure 4.1 shows Arnold's demand curve for burritos. -Refer to Figure 4.1.If the market price is $1.00, what is the consumer surplus on the third burrito?

Figure 4.1 Figure 4.1 shows Arnold's demand curve for burritos. -Refer to Figure 4.1.If the market price is $1.00, what is Arnold's consumer surplus?

Figure 4.12 -Refer to Figure 4.12.The figure above represents demand and supply in the market for gasoline.Use the diagram to answer the following questions. a.How much is the government tax on each litre of gasoline? b.What portion of the unit tax is paid by consumers? c.What portion of the unit tax is paid by producers? d.What is the quantity sold after the imposition of the tax? e.What is the after-tax revenue per litre received by producers? f.What is the total tax revenue collected by the government? g.What is the value of the excess burden of the tax? h.Is this gasoline tax efficient?

Which of the following is not a result of imposing a rent ceiling?

Table 4.4 Price per Bushel (dollars) Quantity Demanded (bushels) Quantity Supplied (bushels) \ 2 40,000 0 4 34,000 4,000 6 28,000 8,000 8 24,000 16,000 10 20,000 20,000 12 18,000 28,000 14 12,000 36,000 16 6,000 40,000 Table 4.4 above contains information about the corn market. Answer the following questions based on this table. -Refer to Table 4.4.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel. a.What is the amount of shortage or surplus in the corn market as result of the price floor? b.If the government agrees to purchase any surplus output at $12, how much will it cost the government? c.If the government buys all of the farmers' output at the floor price, how many bushels of corn will it have to purchase and how much will it cost the government? d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme, what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale? e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer? f.Consider again the two schemes.Which scheme will the farmers prefer? g.Consider again the two schemes.Which scheme will corn buyers prefer?

Figure 4.8 Figure 4.8 shows the market for beer. The government plans to impose a unit tax in this market. -Refer to Figure 4.8.How much of the tax is paid by buyers?

Which of the following is not a result of government price controls?

The graph below represents the market for walnuts.Identify the values of the marginal benefit and the marginal cost at the output levels of 2,000 kilograms, 4,000 kilograms and 6,000 kilograms.At each of these output levels, state whether output is inefficiently high, inefficiently low, or economically efficient.

If, in a competitive market, marginal benefit is less than marginal cost,

Table 4.3 Hourly Wage (dollars) Quantity of Labour Supplied Quantity of Labour Demanded \ 7.50 530,000 650,000 8.50 550,000 630,000 9.50 570,000 610,000 10.50 590,000 590,000 11.50 610,000 570,000 12.50 630,000 550,000 Table 4.3 shows the demand and supply schedules for the labour market in the city of Oshawa. -Refer to Table 4.3.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labour (Q*)?

A ________ curve shows the marginal cost of producing one more unit of a good or service.

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?

Provincial governments in BC, Manitoba, Ontario and Quebec have various forms of rent control.Rent control

Figure 4.1 Figure 4.1 shows Arnold's demand curve for burritos. -Refer to Figure 4.1.What is the total amount that Arnold is willing to pay for 4 burritos?

Figure 4.1 Figure 4.1 shows Arnold's demand curve for burritos. -Refer to Figure 4.1.Arnold's marginal benefit from consuming the third burrito is