Exam 9: Applying the Competitive Model

Sheri is currently purchasing 10 units of a normal good and her indifference curves exhibit diminishing marginal rate of substitution.Suppose there is a decrease in the market price of this good.Then

Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk.The group argues that such a policy would save the "family farm." Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting price,output and social welfare from such a policy.Compare this result to the competitive equilibrium.

In economics,welfare analysis focuses on

What is one reason it might be difficult to dissuade people from pirating music off the Internet?

Joe's demand for spring water can be represented as p = 10 - Q (where p is measured in $/gallon and Q is measured in gallons).He recently discovered a spring where water can be obtained free of charge.His consumer surplus from this water is

If activists successfully lobbied government to force firms to produce more output than they normally would in a perfectly competitive market,

Consumers who are more sensitive to changes in price suffer a greater loss of consumer surplus from any given price increase.

The deadweight loss associated with output less than the competitive level can be determined by

-What is the change in the producer surplus (PS)when the price increase from $1 to $2?

-Suppose the market supply curve for wheat is shown in the above figure.Calculate the producer surplus when price is $2 per bushel.If legislation mandates that the price be $1 per bushel,what is the resulting loss in producer surplus?

In economics,welfare analysis is useful to

If a firm enjoys producer surplus in perfectly competitive Market A of $1000 and would enjoy producer surplus in perfectly competitive Market B of $1200,the firm would consider moving to Market B if

-The above figure shows supply and demand curves for milk.In an effort to help farmers,the government passes a law that establishes a $3 per gallon price support.To maintain the price support,government expenditures must equal

Producer surplus is equal to

Survivability in a perfectly competitive world requires that

Producer surplus equals total revenue minus the sum of all marginal cost.

When is the profit a firm earns equal to the producer surplus? Explain.

What is one reason perfectly competitive firms wish to be ever more efficient?

If in a market the last unit of output was sold at a price higher than marginal cost,

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then consumer surplus will most likely