Exam 3: Using Supply and Demand to Analyze Markets

(Figure: Price and Quantity VII) Refer to Figure: Price and Quantity VII to answer the following questions. a. What is the area of consumer surplus before the increase in demand? b. What is the area of producer surplus before the increase in demand? c. What is the area of consumer surplus after the increase in demand? d. What is the area of producer surplus after the increase in demand? e. What is the area of the deadweight loss after the increase in demand?

The market for cigars is characterized by Q^D = 10 - 0.25P and Q^S = 0.15P, where P is price per box of cigars and Q measures boxes per hour. a. What is the equilibrium price of cigars? b. Suppose the government taxes sellers $5 per box. What are the after-tax prices that buyers pay and sellers receive? c. Suppose the government taxes buyers rather than sellers $5 per box. What are the after-tax prices that buyers pay and sellers receive?

In a small country, the demand and supply of kidneys are represented by Q^D = 10,000 - 0.25P and Q^S = 0.5P + 4,000. Which of the following statements is (are) TRUE? I. The equilibrium price is $8,000. II. At a price ceiling of $0, there are 4,000 volunteer donors. III. At a price ceiling of $0, there is an excess demand of 14,000 kidneys.

In the market for used cars, the demand and supply equations are given by Q^D = 12,000 - 0.4P and Q^S = 0.1P + 5,000, where P is the price per car and Q measures the quantity of cars. What happens at a price floor of $20,000?

(Figure: Market for Gallons I) Figure: Market for Gallons I shows the effect of a government subsidy. Which of the following statements is (are) TRUE? I. The area of the deadweight loss is C + D + E + G + H + I. II) The subsidy causes producer surplus to increase from area F + G + H to area F + G + H + I. III) The government's cost of the subsidy is area B + C + D + E + F + G + H + I. IV) With the subsidy, consumer surplus is area A + B + C + D + E.

(Figure: Price and Quantity IV) At a price ceiling of $8, there is a shortage of _____ and a deadweight loss of _____.

(Figure: Price and Quantity V) For demand curve D₂, consumer surplus is $6,400 at a price of $40. Given this, the demand choke price for D₂ is:

The supply and demand for solar panels are given by Q^S = 5P - 5,000 and Q^D = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. Before the subsidy, producers receive ____ and after the subsidy, producers receive ____.

In the market for cotton, the quantity demanded and quantity supplied are expressed mathematically as Q^D = 400 - 250P and Q^S = 250P - 100, where P is the price per pound of cotton and Q measures pounds of cotton. Suppose the government sets a price ceiling of $0.50 per pound of cotton. a. How big is the shortage resulting from the price ceiling? b. What is the level of consumer surplus with the price ceiling? c. What is the level of producer surplus with the price ceiling? d. What is the value of the deadweight loss associated with the price ceiling?

Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is given by Q^D = 10 - 2.25P And the market supply curve is given by Q^S = -10 + 2.75P Where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. The deadweight loss as a result of the quota is ____.

The demand and supply curves for Fuji apples are given by Q^D = 50 - 6P and Q^S = 4P - 2, where P is price per bag and Q is in thousands of bags. What are consumer surplus and producer surplus at the equilibrium price?

Deadweight loss can be calculated as:

Juanita purchased a Polar Express train set from Lionel Trains. She paid $240 for the set and received consumer surplus of $125. What was Juanita's willingness to pay for the train set?

(Figure: Price and Quantity VII) The area that represents producer surplus with the demand curve D₁ is _____, and the area that represents producer surplus with the demand curve D₂ is ____.

To calculate producer surplus:

Suppose that the demand curve for brown rice is given by P = 50,000 - 3Q², and supply is P = -10,000 + 3Q². The consumer surplus at the equilibrium price is ____.

(Figure: Market for Peanuts II) If the government mandates a price floor of $750, the area of producer surplus changes from:

In a small country, the demand and supply of kidneys are represented by Q^D = 10,000 - 0.25P and Q^S = 0.5P + 4,000. The number of kidneys transplanted at a price floor of $10,000 would be _____.

(Figure: Price and Quantity II) The outward shift of the supply curve will cause producer surplus to increase from area _____ to area _____.

Suppose the market for soda is represented by the supply and demand equations: Q^S = 35P - 39.75 and Q^D = 10.25 - 5P, where P is price per bottle and Q measures bottles per second. a. What are the values of consumer and producer surplus? b. If the government imposes a $0.50 tax per bottle, what are the values of consumer and producer surplus? c. What is the deadweight loss from the tax? How much revenue does the tax yield?