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

Table 4-8 Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-8. If a minimum wage of $10.50 an hour is mandated, what is the quantity of labor supplied?

Table 4-3 -Which of the following statements is true?

Figure 4-6 Figure 4-6 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 4-6. At the equilibrium price of P1, consumers are willing to buy the Q1 pounds of granola. Is this an economically efficient quantity?

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice-cream cones. -Refer to Figure 4-3. What is the total amount that Kendra is willing to pay for 2 ice cream cones?

Table 4-11 -Refer to Table 4-11. 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 consumer surplus?

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R0. -Refer to Figure 4-10. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What area represents the deadweight loss after the imposition of the price floor?

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

What is deadweight loss? When is deadweight loss equal to zero?

Figure 4-7 -Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If 10,000 units of iced tea are sold,

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R0. -Refer to Figure 4-10. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What is the area representing consumer surplus after the imposition of the price floor?

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone?

Figure 4-5 -Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9,

What is the difference between scarcity and a shortage?

Article Summary In an attempt to discourage smoking, New York City Mayor Michael Bloomberg proposed a bill which would set a $10.50 minimum price for a pack of cigarettes. The bill would also prohibit retailers from offering any discounts such as 2-for-1 offers or accepting discount coupons. New York City already has the highest cigarette tax in the country, at $5.85 per pack, and the state of New York is one of many which already require cigarettes be marked up by a specified percentage. This bill is a companion to one which would require stores to keep tobacco products hidden from sight. Although the bills are expected to be challenged in court, a precedent has been set in Rhode Island, where a court upheld a ruling allowing the city of Providence to forbid retailers from accepting coupons and offering discounts on cigarettes. Source: Vivian Yee, "Bloomberg Seeks End to Cheap Cigarettes," New York Times, March 26, 2013. -Refer to the Article Summary. The minimum price of $10.50 per pack of cigarettes being proposed by mayor Bloomberg would have which of the following effects on the market for cigarettes?

Table 4-12 -Refer to Table 4-12. 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?

Figure 4-7 -Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $1,

Table 4-11 -Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. What are the equilibrium price and quantity (in thousands) for Chef Ernie's sushi?

Table 4-3 -Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, The Waco Kid will produce

The graph below represents the market for alfalfa. The market price is $7.00 per bushel. Identify the areas representing consumer surplus, producer surplus, and economic surplus.