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

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

The demand and supply equations for the apple market are: Demand: P = 12 - 0.01Q Supply: P = 0.02Q where P = price per bushel, and Q = quantity. a.Calculate the equilibrium price and quantity. b.Suppose the government guaranteed producers a price of $10 per bushel.What would be the effect on quantity supplied? Provide a numerical value. c.By how much would the $10 price change the quantity of apples demanded? Provide a numerical value. d.Would there be a shortage or surplus of apples? e.What is the size of this shortage or surplus? Provide a numerical value.

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 the equilibrium price of $15 consumers are willing to buy 80 pounds of tiger shrimp.Is this an economically efficient quantity?

One result of a tax is an increase in economic efficiency.

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

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 first burrito?

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping.If a per-unit tax is imposed in the market for this product

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 fourth burrito?

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of economic surplus in this market?

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 producer surplus after the imposition of the ceiling?

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

Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller.Why, then, are gasoline and cigarette taxes imposed on sellers?

Economic surplus

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,

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 The Waco Kid's cowboy hats is $40

Figure 4-6 Figure 4-6 shows the demand and supply curves for the almond market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. -Refer to Figure 4-6.What is the area that represents producer surplus after the imposition of the price floor?

What area on a supply and demand graph represents consumer surplus?

________ is maximized in a competitive market when marginal benefit equals marginal cost.

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 the deadweight loss after the imposition of the ceiling?