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

The following equations represent the demand and supply for bottles of nail polish. Qᴰ = 25 - P Qˢ = -15 + 3P What is the equilibrium price (P)and quantity (Q - in thousands)of bottles of nail polish?

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.What value does Lucinda place on her GPS system?

A price ceiling is a legally determined maximum price that sellers may charge.

Table 4-4 Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-4.If a minimum wage of $11.50 is mandated, there will be a

If the market price is at equilibrium, the deadweight loss is maximized.

What is economic surplus? When is economic surplus at a maximum?

Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4-3.What is the value of producer surplus at a price of $18?

Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service.

What is producer surplus? What does producer surplus measure?

If marginal benefit is greater than marginal cost, output is inefficiently high.

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.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?

If the quantity of donuts supplied is represented by the supply equation Qˢ = -15 + 5P, then to solve for the price of donuts, the equation would be rewritten as

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $2.00, what is the consumer surplus on the second burrito?

Which term refers to a legally established minimum price that firms may charge?

A tax is efficient if it imposes a large excess burden relative to the tax revenue it raises.

If the quantity of fishing poles demanded is represented by the demand equation Qᴰ = 60 - P, then to solve for the price of fishing poles, the equation would be rewritten as

Table 4-3 -Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear.If the market price of cowboy hats is $35, The Waco Kid will produce

The division of the burden of a tax between buyers and sellers in a market is called tax allocation.

The total amount of consumer surplus in a market is equal to the area below the demand curve.