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 concert ticket.If the price of one of the tickets is $36

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $1,what changes in the market would result in an economically efficient output?

When ________ in a market,the total net benefit to society is maximized.

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.Suppose that instead of a price ceiling,the government imposed a price floor of R₁.What is the area representing producer surplus after the imposition of the price floor?

Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.

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 the portion of producer surplus transferred to consumers as a result of the rent ceiling?

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

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

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

Which of the following describes the difference between "scarcity" and "shortage"?

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

A tax is imposed on employers and workers that are used to fund Social Security and Medicare.This tax is sometimes referred to as

Marco goes to the pet store to buy a dozen Koi fish for his new Koi pond.He is willing to pay $200 for the dozen fish,but buys them for a total of $140.Marco's consumer surplus from the purchase is

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the second ice cream cone?

Figure 4-8 Figure 4-8 shows the market for taxi rides.The following question(s)are based on this figure. -Refer to Figure 4-8.To legally drive a taxicab in New York City,you must have a medallion issued by the city government.Assume that only 13,200 medallions have been issued.Let's also assume this puts an absolute limit on the number of taxi rides that can be supplied in New York City on any day,because no one breaks the law by driving a taxi without a medallion.Assume as well that each taxi provides 6 trips per day.In that case,the quantity of taxi rides supplied is 79,200 (or 6 rides per taxi × 13,200 taxis).This is shown in the diagram with a vertical line at this quantity.Assume that there are no government controls on the prices that drivers can charge for rides. a.What would the equilibrium price and quantity be in this market if there was no medallion requirement? b.If there was no medallion requirement,indicate the area that represents consumer surplus. c.If there was no medallion requirement,indicate the area that represents producer surplus. d.If there was no medallion requirement,indicate the area that represents economic surplus. e.What are the price and quantity with the medallion requirement? f.With a medallion requirement in place,what area represents consumer surplus? g.With a medallion requirement in place,what area represents producer surplus? h.With a medallion requirement in place,what area represents the deadweight loss? i.Based on your answers to parts (c)and (g),are taxicab drivers better off with the medallion requirement for taxicabs than without? j.Are consumers better off with or without the medallion requirement for taxicabs?

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 the producer surplus after the imposition of the ceiling?

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

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.With rent control,the quantity supplied is Q₁.Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get.What is the highest rent they can get?

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

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?