Exam 9: Applying the Competitive Model

-The above figure shows the demand and supply curves in the market for milk.Currently,the market is in equilibrium.If the government imposes a $2 per gallon tax to be collected from sellers,calculate the dead weight loss associated with the tax,and explain why the dead weight loss occurs.

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,the consumer's net gain in surplus equals

Sarah's demand curve for shoes has the same slope as Pete's; however,it lies to the right of Pete's.An increase in the price of shoes will cause

-The above figure shows the market for rice in Japan where price is expressed in dollars.S represents the domestic supply curve,and the horizontal line at P = $1 represents the world supply curve.If a $1 tariff is imposed on imported rice,the loss in social welfare is

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $4 per gallon price support,estimate the change in p,Q,and social welfare.

Suppose anyone with a driver's license is capable of supplying one trip from the airport to the downtown business center on any given day.The long-run supply curve of such trips is horizontal at p = $50,which is the average cost of such trips.Suppose daily demand is Q = 1000 - 10p.Calculate the change in consumer surplus,producer surplus and social welfare if the city government requires those people supplying such trips to possess a special license,and the government will issue only 300 licenses.

-The above figure shows supply and demand curves for milk.In an effort to help farmers,the government passes a law that establishes a $3 per gallon price support.The loss in social welfare resulting from this price support equals

Mary purchased a stuffed animal toy for $5.After a few weeks,someone offered her $100 for the toy.Mary refused.One can conclude that Mary's consumer surplus from the toy is

Producer surplus equals

Sarah and David both have linear demand curves for lemonade.Sarah's demand curve for lemonade intersects David's demand curve at a price of 50 cents per glass.Sarah's demand curve is more inelastic than David's.A change in the price of lemonade from 50 cents to 25 cents per glass will

A per unit subsidy increases both consumer and producer surplus,but results in a deadweight loss.

-The above figure shows supply and demand curves for apartment units in a large city.The area "c" represents

What is one reason perfectly competitive firms wish to be ever more efficient?

-The above figure shows supply and demand curves for milk.If the government passes a $2 per gallon specific tax,the welfare loss will equal

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,the loss in social welfare equals

If entry is limited due to a limited input,firms in that market earn long run economic profit.

Consumer surplus from a given purchase is the difference between what one was willing to pay for that purchase and what was actually paid.

-Suppose the market supply curve for wheat is shown in the above figure.Calculate the producer surplus when price is $2 per bushel.If legislation mandates that the price be $1 per bushel,what is the resulting loss in producer surplus?

As the quantity produced of a good increases,the social welfare generated by that good increases.

Rent seeking in the form of lobbying for an increase in import tariffs by domestic producers