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

Table 4-2 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one of the tickets is $18,

Price ceilings are illegal in the United States.

To affect the market outcome, a price ceiling

If equilibrium is achieved in a competitive market, then

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.At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp.Is this an economically efficient quantity?

If the price of chewing gum is represented by P in equation P = 25 - 0.5 Qᴰ, then the corresponding quantity of chewing gum demanded is represented by the demand equation

A demand curve shows

Article Summary Voters in California approved a $2 per pack tax increase on cigarettes, which went into effect on April 1, 2017. Cigarette taxes are now $2.87 per pack in California, the ninth highest cigarette tax in the country. Approximately one-in-nine adults in California are smokers, and the tax increase is estimated to generate almost $1.4 billion in revenue during the first year, with the revenue designated for the state-run health care plan as well as various state-wide anti-smoking campaigns. Source: Andrew Blake, "Cigarette tax hike takes effect in California, costs surge by $2 per pack," Washington Times, April 1, 2017. -Refer to the Article Summary.The additional tax of $2 per pack of cigarettes will have which of the following effects on the market for cigarettes in California?

Figure 4-7 -Refer to Figure 4-7 which shows the market for vitamins.Suppose the government imposes a price ceiling of Pᵥ.How will the price ceiling affect the quantity supplied, quantity demanded, and quantity exchanged?

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an effect on the market?

A minimum wage law dictates

In New York City, government limits on the supply of taxis resulted in a price ________ the competitive market level, which would typically ________ economic efficiency.

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9, what changes in the market would result in an economically efficient output?

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

Using a supply and demand graph, illustrate the effect of the addition of a $10.00 per-unit 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?

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles.After the purchase of a new snowmobile, a buyer must pay the government $1,500.How would the imposition of the tax on buyers be illustrated in a graph?

Figure 4-8 Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. -Refer to Figure 4-8.What is the size of the per-unit tax?

In a city with rent-controlled apartments, all of the following are true except

What is a black market?

In order to be binding, a price ceiling