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

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 quantity of apartments demanded at the new price?

The cities of Francistown and Nalady are five miles apart.Francistown enacts a rent control law that puts a ceiling on rents well below their equilibrium market value.Predict the short-run impact of this law on the competitive equilibrium rent in Nalady,which does not have a rent control law. a.Illustrate your answer with one demand and supply graph for the apartment market in Francistown and another demand and supply graph for the apartment market in Nalady. b.Make sure that your graphs clearly show (1)the initial equilibrium before the rent control in both markets and (2)what happens after the imposition of rent control. c.Clearly show any shifts in the demand or supply curves,and the movement along the curves for each market. d.Label your graphs fully and provide written explanation for your graphs.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

Figure 4-15 shows the market for beer.The government plans to impose a per-unit tax in this market. -Refer to Figure 4-15.What is the size of the per-unit tax?

When Congress passed a law that imposed a tax designed to fund its Social Security and Medicare programs it wanted employers and workers to share the burden of the tax equally.Most economists who have studied the incidence of the tax have concluded

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 the portion of consumer surplus transferred to producers as a result of the price floor?

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 20,000 units of iced tea are sold

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 Q1 pounds of granola.Is this an economically efficient quantity?

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?

Table 4-5 Consumer Willingness to Pay Violet \ 48 Walter 40 Xavier 30 Yolanda 24 Zachary 14 -Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one ticket is $50

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 P2?

Table 4-6 Marko's Polos Marginal Cost (dollars) 1 st shirt \ 7 2nd shirt 10 3rd shirt 15 4th shirt 20 -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 price of polo shirts increases from $15 to $20

If the market price is at equilibrium,the producer surplus is minimized.

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

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 $3,what changes in the market would result in an economically efficient output?

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

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 is the area that represents producer surplus after the imposition of the price floor?

If marginal benefit is less than marginal cost,output is inefficiently high.

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 consumer surplus after the imposition of the price floor?

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