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

Companies in the sharing economy have the potential to lower the equilibrium price in their market, and by doing so increase efficiency. This would have a tendency to

If buyers were required to pay the federal excise tax on gasoline directly to the government, the demand curve for gasoline would shift up.

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 supplied decreases by 80,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Table 4-6 -Refer to Table 4-6. 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 $30, producer surplus is

If the quantity of donuts supplied is represented by the equation QS = -15 + 5P, then the corresponding price of donuts is represented by the equation

Using a supply and demand graph, illustrate the effect of an increase in the federal cigarette tax of $1.00 per pack, where the entire tax burden falls on the consumer. Assume the equilibrium price before the tax is $5.00 per pack and the equilibrium quantity is 30 million packs. After the implementation of the tax, what are the equilibrium price and equilibrium quantity?

Willingness to pay measures

Table 4-10 Table 4-10 above contains information about the wheat market. Answer the following questions based on this table. -Refer to Table 4-10. 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?

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 the deadweight loss after the imposition of the price floor?

Table 4-13 -Refer to Table 4-13. 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?

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 decreases by 80,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

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

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?

A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises.

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice-cream cones. -The total amount of producer surplus in a market is equal to the area below the supply curve.

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice-cream cones. -Refer to Figure 4-3. If the market price is $2.50, what is the consumer surplus on the first ice cream cone?

Figure 4-15 Figure 4-15 shows the market for beer. The government plans to impose a unit tax in this market. -Refer to Figure 4-15. How much of the tax is paid by producers?

Figure 4-4 Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4-4. What is the value of producer surplus at a price of $18?

Figure 4-17 -Refer to Figure 4-17. Suppose the market is initially in equilibrium at price P1 and then the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax?

A demand curve shows