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

Figure 4-1 Figure 4-1 shows Kendra's demand for ice-cream cones curve. -Refer to Figure 4-1.Kendra's marginal benefit from consuming the second ice cream cone is

In a competitive market the ________ curve shows the marginal benefit received by consumers and the ________ curve shows the marginal cost to producers.

Figure 4-2 -Refer to Figure 4-2.What area represents producer surplus at a price of P₁?

Figure 4-5 Figure 4-5 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-5. What is the area that represents consumer surplus after the imposition of the ceiling?

Suppose there are two cities that have rent controlled apartments. In one city (Albany)all apartments are subject to rent control; in the other city (Halftrack)one-half of the apartments are rent controlled. Which of the following is most likely to be true?

Employers withhold several taxes from employees ' paychecks,one of which is FICA.Congress requires employers to pay half of the FICA tax and workers to pay the other half.Does this mean that the burden of the FICA tax falls evenly on employers and employees? Briefly explain.

Table 4-5 -Refer to Table 4-5. 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?

Figure 4-2 -Refer to Figure 4-2.What area represents the decrease in producer surplus when the market price falls from P₂ to P₁?

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

The difference between the ________ for a good and the ________ is called consumer surplus.

Table 4-5 -Refer to Table 4-5. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of consumer surplus?

Figure 4-12 -Refer to Figure 4-12. The figure above represents demand and supply in the market for cigarettes. Use the diagram to answer the following questions. a.How much is the government tax on each pack of cigarettes? 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 pack 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 cigarette tax efficient?

Figure 4-9 Figure 4-9 shows the market for cigarettes. The government plans to impose a unit tax in this market. -Refer to Figure 4-9. How much of the tax is paid by buyers?

A supply curve shows

Table 4-3 Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-3.Suppose that the quantity of labor demanded increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

What is consumer surplus? Why would policy makers be interested in consumer surplus?

Figure 4-6 Figure 4-6 shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. -Refer to Figure 4-6.What is the value of producer surplus after the imposition of the price floor?

Figure 4-9 Figure 4-9 shows the market for cigarettes. The government plans to impose a unit tax in this market. -Refer to Figure 4-9.The price buyers pay after the tax is

________ is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which the sum of consumer surplus and producer surplus is at a maximum.

Economic efficiency is achieved when there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and