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

Table 4-1 -Refer to Table 4-1.The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short-sleeved polo shirt.If the price of one of the shirts is $28 dollars

If equilibrium is achieved in a competitive market

Figure 4-6 Figure 4-6 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 4-6.What area represents consumer surplus after the imposition of the price floor?

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield.Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of consumer surplus after the imposition of the ceiling?

Table 4-2 -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 ticket rises from $10 to $19,

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

If the price of hairspray is represented by P in the equation P = 10 - 0.2 Qᴰ, then the corresponding quantity of hairspray demanded is represented by the demand equation

Table 4-5 Table 4-5 above contains information about the corn market.Answer the following questions based on this table. -Refer to Table 4-5.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?

Paul goes to Sportsmart to buy a new tennis racquet.He is willing to pay $200 for a new racquet, but buys one on sale for $125.Paul's consumer surplus from the purchase is

Article Summary Among a package of anti-smoking bills designed to lower California's health care costs by reducing the use of tobacco products is a bill sponsored by Dr. Richard Pan that would increase the tax on a pack of cigarettes by $2. California currently has a tobacco tax of 87-cents-per-pack, making California's tax 33rd in the nation and well below the New York state tax of $4.35 a pack. The state taxes are in addition to a $1.01 federal tax on cigarettes. The bill stipulates that the revenue collected must be used to increase the number of physicians in California as well as support existing health care programs managed by the state. A Field Poll taken one day following the announcement of the bill found that two-thirds of California voters support the increase in the cigarette tax. Source: Tracy Seipel and Jessica Calefati, "Cigarette tax: California voters overwhelmingly back $2-a-pack increase," San Jose Mercury News, August 27, 2015. -Refer to the Article Summary above.The additional tax of $2 per pack of cigarettes being proposed by Senator Pan would have which of the following effects on the market for cigarettes in California?

Figure 4-3 Figure 4-3 shows the market for tiger shrimp.The market is initially in equilibrium at a price of $15 and a quantity of 80.Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4-3.What is the value of the deadweight loss at a price of $18?

A price ceiling is a legally determined maximum price that sellers may charge.

Table 4-4 Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-4.Suppose that the quantity of labor supplied decreases by 80,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Table 4-1 -Refer to Table 4-1.The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel, but the market price is $5.00 per bushel.Identify the areas representing consumer surplus, producer surplus, and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

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

What do economists mean by an efficient tax?

If the quantity of soccer balls demanded is represented by the demand equation Qᴰ = 80 - 2P, then to solve for the price of soccer balls, the equation would be rewritten as

Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

To affect the market outcome, a price ceiling