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

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.At a price of $1

When the marginal benefit equals the marginal cost of the last unit sold in a competitive market

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.If 20,000 units of iced tea are sold

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

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

Table 4-7 -Refer to Table 4-7.The equations above describe the demand and supply for Pauline's Pickled Pomegranates.The equilibrium price and quantity for Pauline's Pickled Pomegranates are $30 and 15 thousand units.What is the value of economic surplus in this market?

Figure 4-7 -Refer to Table 4-5.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 wheat at $21 per bushel. a.What is the amount of shortage or surplus in the wheat market as result of the price floor? b.If the government agrees to purchase any surplus output at $21,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 wheat 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 wheat buyers prefer?

If the quantity of tacos demanded is represented by the equation Q_D = 20 - 0.5P then the corresponding price of tacos is represented by the equation

The graph below represents the market for alfalfa.The equilibrium price is $7.00 per bushel,but the market price is $9.00 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 $9.00.

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice-cream cones. -Refer to Figure 4-1.Kendra's marginal benefit from consuming the first ice cream cone is

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 $9.50 an hour is mandated,what is the quantity of labor supplied?

Figure 4-5 Figure 4-5 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R₀. -Refer to Figure 4-5.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive.

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice-cream cones. -Refer to Figure 4-1.If the market price is $2.50,what is the maximum number of ice cream cones that Kendra will buy?

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 producers?

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 P_2. -Refer to Figure 4-3.At the equilibrium price of P₁,consumers are willing to buy the Q₁ pounds of granola.Is this an economically efficient quantity?

A black market is a market where buying and selling take place

In cities with rent control,people have an incentive to list their apartments on sites such as Airbnb at rents ________ the controlled rates,because rent control causes a ________ of apartments.

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 producer surplus?