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

Table 4-2 -Refer to Table 4-2.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

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

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

Figure 4-8 Figure 4-8 shows the market for taxi rides. The following question(s) are based on this figure. -Refer to Figure 4-8. To legally drive a taxicab in New York City,you must have a medallion issued by the city government.Assume that only 13,200 medallions have been issued.Let's also assume this puts an absolute limit on the number of taxi rides that can be supplied in New York City on any day,because no one breaks the law by driving a taxi without a medallion.Assume as well that each taxi provides 6 trips per day. In that case,the quantity supplied of taxi rides is 79,200 (or 6 rides per taxi × 13,200 taxis).This is shown in the diagram with a vertical line at this quantity.Assume that there are no government controls on the prices that drivers can charge for rides. a.What would the equilibrium price and quantity be in this market if there were no medallion requirement? b.If there were no medallion requirement,indicate the area that represents consumer surplus. c.If there were no medallion requirement,indicate the area that represents producer surplus. d.If there were no medallion requirement,indicate the area that represents economic surplus. e.What are the price and quantity with the medallion requirement? f.With a medallion requirement in place,what area represents consumer surplus? g.With a medallion requirement in place,what area represents producer surplus? h.With a medallion requirement in place,what area represents the deadweight loss? i.Based on your answers to parts (c)and (g),are taxicab drivers better off with the medallion requirement for taxicabs than without? j.Are consumers better off with or without the medallion requirement for taxicabs?

Figure 4-4 -Refer to Figure 4-4. 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 Figure 4-6 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 4-6.What is the value of consumer surplus after the imposition of the price floor?

Figure 4-1 Figure 4-1 shows Kendra's demand for ice-cream cones curve. -Refer to Figure 4-1.If the market price is $2.50,what is the maximum number of ice cream cones that Kendra will buy?

Figure 4-9 Figure 4-9 shows the market for cigarettes. The government plans to impose a unit tax in this market. -Refer to Figure 4-9.What is the size of the unit tax?

New York City has about two million apartments.Of this number

The government proposes a tax on halogen light bulbs. Sellers will bear the entire burden of the tax if the

Which of the following describes the difference between "scarcity" and "shortage"?

Table 4-1 -Refer to Table 4-1. The table above lists the highest prices three consumers,Curly,Moe,and Larry,are willing to pay for a bottle of champagne. If the price of the champagne falls from $24 to $14

Table 4-4 Table 4-4 above contains information about the wheat market. Answer the following questions based on this table. -Refer to Table 4-4. 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 wheat at $21 per bushel. a.What is the amount of shortage or surplus in the wheat market as result of the price floor? b.If the government agrees to purchase any surplus output at $21,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 wheat 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 wheat buyers prefer?

The minimum wage is an example of

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

"Taxes are what we pay for a civilized society." This statement was made by

Figure 4-4 -Refer to Figure 4-4. The figure above represents the market for iced tea. Assume that this is a competitive market.At a price of $3

Economists ________ that price controls are desirable.

In Singapore the government places a $5,000 tax on the buyers of new automobiles.After the purchase of a new car,a buyer must pay the government $5,000. How would the imposition of the tax on buyers be illustrated in a graph?

Figure 4-10 -Refer to Figure 4-10. Suppose the market is initially in equilibrium at price P₁ and now the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax? For demand curve D₁