Exam 7: Market Efficiency and Welfare

Phil and Lasca have always wanted to take a cruise.Although willing to pay $5,000 for a Caribbean cruise for two,they were able to purchase a cruise vacation for two for $3,500.Their total consumer surplus amounted to:

Exhibit 7-8 Refer to Exhibit 7-8.When the price falls from P₂ to P₁,producer surplus:

Exhibit 7-10 Refer to Exhibit 7-10.The producer surplus before the subsidy is area

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P₁,sellers lose producer surplus equal to area ____,but gain producer surplus equal to area ____.

The more elastic the supply curve,the ____ will be the effect of a tax on the quantity exchanged and the ____ will be the welfare cost.

The more elastic the demand curve,the ____ will be the effect of a tax on the quantity exchanged and the ____ will be the welfare cost.

Exhibit 7-12 Refer to Exhibit 7-12.Producer surplus before the price floor is area:

How does the size of the deadweight loss from a tax depend on the price elasticities of supply and demand?

Exhibit 7-2 Refer to Exhibit 7-2.What is the consumer surplus of the 2^nd unit consumed assuming this market reaches equilibrium?

Exhibit 7-11 Refer to Exhibit 7-11.The consumer surplus after the price ceiling is area

Goods that are heavily taxed,such as alcohol and cigarettes,often have:

Graphically,consumer surplus is measured by:

As a result of a per-unit tax on output in a market:

Exhibit 7-6 Refer to Exhibit 7-6.If the market price equals P₂,consumer surplus can be identified in the diagram as area:

As the market price of a good falls due to an increase in supply,consumer surplus:

Ceteris paribus,a decrease in the price of a good will cause the: