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

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.

What is a black market?

Table 4-1 Consumer Willingness to Pay Tom \ 40 Dick 30 Harriet 25 -Refer to Table 4-1.The table above lists the highest prices three consumers,Tom,Dick,and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of one of the shirts is $28 dollars

The total amount of producer surplus in a market is equal to the area above the market supply curve and below the market price.

Which of the following is not a result of imposing a rent ceiling?

Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 8.00 350,000 390,000 8.50 360,000 380,000 9.00 370,000 370,000 9.50 380,000 360,000 10.00 390,000 350,000 10.50 400,000 340,000 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.Suppose that the quantity of labor supplied decreases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

The sum of consumer surplus and producer surplus is called economic surplus.

When Airbnb customers in Malibu start paying hotel taxes,this will have the potential to ________ the equilibrium price in this market and,therefore,________ efficiency.

What is consumer surplus? Why would policy makers be interested in consumer surplus?

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

________ 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.

Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.If the market price is $4.00,what is the maximum number of ice cream cones that Kendra will buy?

If the market price is at equilibrium,the deadweight loss is zero.

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 deadweight loss after the imposition of the price floor?

Table 4-3 The Waco Kid's Cowboy Hats Marginal Cost (dollars) 1st hat \ 24 2nd hat 30 3rd hat 38 4th hat 46 -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 The Waco Kid's cowboy hats is $40

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 excess burden of a tax is also a deadweight loss.

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.At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp.Is this an economically efficient quantity?

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 consumer surplus after the imposition of the price floor?