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

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Question 151

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Figure 4-18 shows the market for cigarettes.The government plans to impose a unit tax in this market. -Refer to Figure 4-18.The price buyers pay after the tax is

A) $12.
B) $8.
C) $5.
D) $3.

E) A) and B)
F) All of the above

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Question 152

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The difference between the ________ and the ________ from the sale of a product is called producer surplus.

A) lowest price a firm would have been willing to accept;price it actually receives
B) highest price a firm would have been willing to accept;lowest price it was willing to accept
C) cost to produce a product;price a firm actually receives
D) cost to produce a product;profit received

E) None of the above
F) A) and B)

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Question 153

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The demand and supply equations for the peach market are: Demand: P = 24 - 0.5Q Supply: P = -6 + 2.5Q where P = price per bushel,and Q = quantity (in thousands). a.Calculate the equilibrium price and quantity. b.Suppose the government guaranteed producers a price of $24 per bushel.What would be the effect on quantity supplied? Provide a numerical value. c.By how much would the $24 price change the quantity of peaches demanded? Provide a numerical value. d.Would there be a shortage or surplus of peaches? e.What is the size of this shortage or surplus? Provide a numerical value.

Price floors are illegal in the United States.

Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.00,what is the maximum number of burritos that Arnold will buy?

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 the price of iced tea is $3

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

Juanita goes to the Hardware Emporium to buy a new circular saw.She is willing to pay $120 for a new saw,but buys one on sale for $85.Juanita's consumer surplus from the purchase is

The actual division of the burden of a tax between buyers and sellers in a market is called

The additional cost to a firm of producing one more unit of a good or service is equal to producer surplus.

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

In a city with rent-controlled apartments,all of the following are true except

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 producer surplus after the imposition of the price floor?

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

Which term refers to a legally established minimum price that firms may charge?

Economic surplus is maximized in a competitive market when

$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Hourly Wage } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Quantity of } \\\text { Labor } \\\text { Supplied }\end{array} & \begin{array} { c } \text { Quantity of } \\\text { Labor } \\\text { Demanded }\end{array} \\\hline \$ 8.00 & 350,000 & 390,000 \\\hline 8.50 & 360,000 & 380,000 \\\hline 9.00 & 370,000 & 370,000 \\\hline 9.50 & 380,000 & 360,000 \\\hline 10.00 & 390,000 & 350,000 \\\hline 10.50 & 400,000 & 340,000 \\\hline\end{array}$ 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 increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Which term refers to a legally established maximum price that firms may charge?

In the economic sense,almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

What is economic surplus? When is economic surplus at a maximum?