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

Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 7.50 530,000 650,000 8.50 550,000 630,000 9.50 570,000 610,000 10.50 590,000 590,000 11.50 610,000 570,000 12.50 630,000 550,000 Table 4-7 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-7.If a minimum wage of $11.50 an hour is mandated,what is the quantity of labor supplied?

Price per Bushel (dollars) Quantity Demanded (bushels) Quantity Supplied (bushels) \ 2 40,000 0 4 34,000 4,000 6 28,000 8,000 8 24,000 16,000 10 20,000 20,000 12 18,000 28,000 14 12,000 36,000 16 6,000 40,000 Table 4-9 above contains information about the corn market.Answer the following questions based on this table. -Refer to Table 4-9.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 corn at $12 per bushel. a.What is the amount of shortage or surplus in the corn market as result of the price floor? b.If the government agrees to purchase any surplus output at $12,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 corn 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 corn buyers prefer?

If the quantity of fishing poles demanded is represented by the demand equation QD = 60 - P,then to solve for the price of fishing poles,the equation would be rewritten as

If,in a competitive market,marginal benefit is greater than marginal cost

Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 7.50 530,000 650,000 8.50 550,000 630,000 9.50 570,000 610,000 10.50 590,000 590,000 11.50 610,000 570,000 12.50 630,000 550,000 Table 4-7 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-7.Suppose that the quantity of labor supplied increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Rent control is an example of a price ceiling.

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.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

A minimum wage law dictates

Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.Kendra's marginal benefit from consuming the third ice cream cone is

Table 4-13 Demand Supply P=50-Q P=10+1/3Q Q=50-P Q=3P-30 -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 economic surplus in this market?

Consumer surplus in a market for a product would be equal to the area under the demand curve if

Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.Kendra's marginal benefit from consuming the second ice cream cone is

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 $10.50 is mandated there will be a

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 producer surplus after the imposition of the price floor?

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 consumer surplus at P2?

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?

There is a shortage of every good that is scarce.

Table 4-2 Consumer Willingness to Pay Anya \ 24 Basil 20 Celeste 15 Dralon 12 Esther 7 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one of the tickets is $18

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.The economists found that

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.At an output of 30,000 units