Exam 5: Economic Efficiency , Government Price Setting and Taxes

Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. How much does Lucinda value her GPS system?

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of the deadweight loss after the imposition of the price floor?

-Refer to Figure 5-1. If the market price is $1.00, what is Arnold's consumer surplus?

-Refer to Figure 5-1. What is the total amount that Arnold is willing to pay for 4 burritos?

-Refer to Table 5-5. An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop. Suppose the federal government sets a price floor for corn at $12 per bushel. a. What is the amount of shortage or surplus in the corn market as result of the price floor? b. If the government agrees to purchase any surplus output at $12, how much will it cost the government? c. If the government buys all of the farmers' output at the floor price, how many bushels of corn will it have to purchase and how much will it cost the government? d. Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get. Under this scheme, what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale? e. In this problem we have considered two government schemes: (1) a price floor is established and the government purchases any excess output and (2) the government buys all the farmers' output at the floor price and resells at whatever price it can get. Which scheme will taxpayers prefer? f. Consider again the two schemes. Which scheme will the farmers prefer? g. Consider again the two schemes. Which scheme will corn buyers prefer?

If 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 consumer surplus plus producer surplus is maximised, then

-Refer to Table 5-4. If a minimum wage of $11.50 is mandated, there will be a

Which of the following is not a consequence of minimum wage laws?

-Refer to Table 5-4. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labour (Q*)?

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Consumers are willing to purchase a product up to the point where

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

Shortage means the same thing as scarcity.

-Refer to Figure 5-5. What is the value of producer surplus after the imposition of the ceiling?

The total amount of producer surplus in a market is equal to the area below the supply curve.

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

The following equations represent the demand and supply for bottles of nail polish. Q_D = 25 - P Q_S = -15 + 3P What is the equilibrium price (P) and quantity (Q - in thousands) of bottles of nail polish?

-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 $50, producer surplus is

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of producer surplus after the imposition of the price floor?

If equilibrium is achieved in a competitive market,