Exam 4: Economic Efficiency, government Price Setting, and Taxes

Which of the following statements is not true?

Each point on a demand curve shows

The willingness of consumers to buy a product at different prices is shown on a

If,in a competitive market,marginal benefit is greater than marginal cost

Table 4-3 Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-3.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor supplied?

In a competitive market equilibrium the ________ equals the ________ of the last unit sold.

Table 4-5 -Refer to Table 4-5.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.What are the equilibrium price and quantity (in thousands)for Aunt Maud's Lotion?

Table 4-3 Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-3.Suppose that the quantity of labor demanded increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Suppose there are two cities that have rent controlled apartments.In one city (Albany)all apartments are subject to rent control; in the other city (Halftrack)one-half of the apartments are rent controlled.Which of the following is most likely to be true?

Figure 4-2 -Refer to Figure 4-2.What area represents the decrease in producer surplus when the market price falls from P₂ to P₁?

Which of the follow is a result of imposing a rent ceiling?

Figure 4-2 -Refer to Figure 4-2.What area represents producer surplus at a price of P₁?

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

Figure 4-9 Figure 4-9 shows the market for cigarettes.The government plans to impose a unit tax in this market. -Refer to Figure 4-9.For each unit sold,the price sellers receive after the tax (net of tax)is

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 supplied of taxi rides 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 were no medallion requirement? b.If there were no medallion requirement,indicate the area that represents consumer surplus. c.If there were no medallion requirement,indicate the area that represents producer surplus. d.If there were 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 4-9 Figure 4-9 shows the market for cigarettes.The government plans to impose a unit tax in this market. -Refer to Figure 4-9.How much of the tax is paid by buyers?

The maximum price that a buyer is willing to pay for a good measures his

Figure 4-3 Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂ in order to raise the price to P₂. -Refer to Figure 4-3.At the price P₂ consumers are willing to buy the Q₂ pounds of granola.Is this an economically efficient quantity?