Exam 5: Economic Efficiency , Government Price Setting and Taxes

-Refer to Table 5-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specialises in producing fancy dress costumes. If the market price of cowboy hats is $35, The Waco Kid will produce

Frieda is at her local florist to buy a dozen roses. She is willing to pay $75 for the roses, and buys them for $75. Frieda's consumer surplus from the purchase is

-Refer to Figure 5-7. For each unit sold, the price sellers receive after the tax (net of tax) is

-Refer to Table 5-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specialises in producing fancy dress costumes. If the market price of The Waco Kid's cowboy hats is $40,

What is 'tax incidence'? What determines tax incidence in a competitive market?

-Refer to Figure 5-10. The figure above illustrates the markets for two goods, Good X and Good Y. Suppose an identical dollar tax is imposed in each market. a. Compare the consumer burden and producer burden in each market. Illustrate your answer graphically. b. If the goal of the government is to raise revenue with minimum impact to quantity consumed, in which market should the tax be imposed? c. If the goal of the government is to discourage consumption, in which market should the tax be imposed?

A demand curve shows

-Refer to Table 5-7. The equations above describe the demand and supply for Bubba's Fried Jellybeans. The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units. What is the value of producer surplus?

If the market price is at equilibrium, the deadweight loss is maximised.

-Refer to Figure 5-1. If the market price is $2.00, what is Arnold's consumer surplus?

In a competitive market equilibrium

-Refer to Figure 5-7. The price buyers pay after the tax is

-Refer to Table 5-6. 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?

-Refer to Figure 5-7. What is the size of the unit tax?

-Refer to Figure 5-7. How much of the tax is paid by producers?

-Refer to Figure 5-1. What is the total amount that Arnold is willing to pay for 2 burritos?

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production, and the sum of consumer surplus and producer surplus is maximised.

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

The graph below represents the market for lychee nuts. The equilibrium price is $7.00 per bushel, but the market price is $5.00 per bushel. Identify the areas representing consumer surplus, producer surplus, and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

The graph below represents the market for walnuts. Identify the values of the marginal benefit and the marginal cost at the output levels of 2000 pounds, 4000 pounds and 6000 pounds. At each of these output levels, state whether output is inefficiently high, inefficiently low, or economically efficient.