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

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.If a minimum wage of $10.00 an hour is mandated,what is the quantity of labor supplied?

If a tax is imposed on a product,the buyer will always bear the entire burden of the tax.

Figure 4-21 -Refer to Figure 4-21.The figure above represents demand and supply in the market for cigarettes.Use the diagram to answer the following questions. a.How much is the government tax on each pack of cigarettes? b.What portion of the unit tax is paid by consumers? c.What portion of the unit tax is paid by producers? d.What is the quantity sold after the imposition of the tax? e.What is the after-tax revenue per pack received by producers? f.What is the total tax revenue collected by the government? g.What is the value of the excess burden of the tax? h.Is this cigarette tax efficient?

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.What area represents the deadweight loss at P2?

In the market for gasoline,an increase in the federal excise tax on gasoline would shift the supply curve up.

A demand curve shows

What is producer surplus? What does producer surplus measure?

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.What area represents producer surplus at the equilibrium price of P1?

Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.If the market price is $3.00,what is the consumer surplus on the second ice cream cone?

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Which of the following statements is not true?

Which of the following statements best describes the concept of consumer surplus?

The difference between the ________ for a good and the ________ is called consumer surplus.

________ dictates the lowest wage that firms may pay for labor.

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.

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.50,what is Arnold's consumer surplus?

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 price of cowboy hats decreases from $38 to $30

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?

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