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

Monique buys a new television for $795.She receives consumer surplus of $355 from the purchase.How much does Monique value her television?

Rent control is an example of a price floor.

There is a shortage of every good that is scarce.

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?

Suppose an excise tax of $0.75 is imposed on every pack of cigarettes sold and sellers are responsible for paying this tax.How would the imposition of the tax be illustrated in a graph?

FICA is a payroll tax imposed on employers and workers that is used to fund Social Security and Medicare.Which of the following statements regarding the tax is true?

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.They found that in the year they analyzed,47 million consumers paid an average of $36 per month to subscribe to a broadband Internet service,and estimated the value of total consumer surplus for these subscribers was equal to $890.5 million.Based on these numbers,what was the average monthly consumer surplus per subscriber for broadband Internet service?

In a competitive market the ________ curve shows the marginal benefit received by consumers and the ________ curve shows the marginal cost to producers.

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.The price buyers pay after the tax is

Producer surplus is the difference between the highest price a firm is willing to accept for a product and the price it actually receives for the product.

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.If a minimum wage of $10.50 an hour is mandated,what is the quantity of labor supplied?

The market price for coffee is $2.25 per cup.Austin is willing to pay $5.00 per cup,Colin is willing to pay $4.00 per cup,Lucy is willing to pay $3.00 per cup,and Ike is willing to pay $2.00 per cup.Construct a graph showing the consumer surplus for each cup of coffee purchased.How many cups of coffee will be purchased? What is the value of the consumer surplus each of the four consumers receives from their coffee purchases?

To affect the market outcome,a price floor

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units.What is the value of economic surplus in this market?

Assume the market price for tangerines is $18.00 per bushel.At the market price,tangerine growers are willing to supply a quantity of 12,000 bushels per week.The quantity supplied drops to zero when the price falls to $5.00 per bushel.Construct a graph showing this data,calculate the total producer surplus in the market for tangerines,and show the total producer surplus on the graph.

An efficient tax is

Congress passed the Freedom to Farm Act in 1996.What was the purpose of this Act?

Table 4-3 -Refer to Table 4-3.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the market price of Marko's polo shirts is $13,Marko's will produce

Economists ________ that price controls are desirable.

Figure 4-6 Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. -Refer to Figure 4-6.What is the value of producer surplus after the imposition of the price floor?