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

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 changes in the market would result in an economically efficient output?

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?

Table 4-5 -The additional cost to a firm of producing one more unit of a good or service is the

Figure 4-9 Figure 4-9 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. -Refer to Figure 4-9. What area represents consumer surplus after the imposition of the price floor?

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 $9.50 is mandated, there will be a

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. With rent control, the quantity supplied is Q1. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get?

Price ceilings are illegal in the United States.

Economists have shown that the burden of a tax is

Figure 4-11 Figure 4-11 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 4-11. What is the value of the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

If the price of hairspray is represented by equation P = 10 - 0.2 QD, then the corresponding quantity of hairspray demanded is represented by the equation

Table 4-4 -Refer to Table 4-4. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of one of the bottles is $27 dollars, total consumer surplus will be

Table 4-4 -Refer to Table 4-4. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of one of the bottles is $95 dollars, total consumer surplus will be

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

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

Buyers will bear the entire burden of a unit tax if the demand curve for a product is

If the quantity of jelly beans supplied is represented by the equation QS = -20 +4P then the corresponding price of jelly beans is represented by the equation

The marginal cost for Java Joe's to produce its first cup of coffee is $0.75. Its marginal cost to produce its second cup of coffee is $1.25. Its marginal cost increases by $0.50 for each additional cup of coffee it produces. Suppose the market price for coffee is $2.25. Construct a graph showing the producer surplus for each cup of coffee Java Joe's will sell. How many cups of coffee will Java Joe's sell? What is the value of the producer surplus Java Joe's receives for each cup of coffee it sells?

________ is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which the sum of consumer surplus and producer surplus is at a maximum.

Table 4-7 Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-7. 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?

The demand and supply equations for the apple market are: Demand: P = 12 - 0.01Q Supply: P = 0.02Q where P = price per bushel, and Q = quantity. a. Calculate the equilibrium price and quantity. b. Suppose the government guaranteed producers a price of $10 per bushel. What would be the effect on quantity supplied? Provide a numerical value. c. By how much would the $10 price change the quantity of apples demanded? Provide a numerical value. d. Would there be a shortage or surplus of apples? e. What is the size of this shortage or surplus? Provide a numerical value.