Question 1

(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?

Accepted Answer

The answer of (Figure: Price and Quantity VII) Refer to...

Question 2

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?

Accepted Answer

The answer of The market for cigars is characterized by...

Question 3

In a small country, the demand and supply of kidneys are represented by QD = 10,000 - 0.25P and QS = 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.

Accepted Answer

A)  I, II, and III 
B)  II and III (because the demand curve shifts out, pushing up the price) 
C)  I and II 
D)  III

Question 4

In the market for used cars, the demand and supply equations are given by QD = 12,000 - 0.4P and QS = 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?

Accepted Answer

A)  There is a surplus of 7,000 cars. 
B)  There is a surplus of 3,000 cars. 
C)  Consumers want to buy 3,000 cars. 
D)  Consumers want to buy 7,000 cars.

Question 5

(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.

Accepted Answer

A)  I and IV 
B)  I and III 
C)  III only 
D)  II, III, and IV

Question 6

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

Accepted Answer

A)  200 pounds; $1,200 
B)  500 pounds; $400 
C)  300 pounds; $600 
D)  300 pounds; $300

Question 7

(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:

Accepted Answer

A)  $200. 
B)  $300. 
C)  $100. 
D)  $60.

Question 8

The supply and demand for solar panels are given by QS = 5P - 5,000 and QD = 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 ____.

Accepted Answer

A)  $2,000; $1,750 
B)  $2,000; $2,250 
C)  $2,250; $2,000 
D)  $1,750; $2,250

Question 9

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?

Accepted Answer

The answer of In the market for cotton, the quantity...

Question 10

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
QD = 10 - 2.25P
And the market supply curve is given by
QS = -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 ____.

Accepted Answer

A)  $1,000 
B)  $500,000 
C)  $1,500 
D)  $1,605

Question 11

The demand and supply curves for Fuji apples are given by QD = 50 - 6P and QS = 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?

Accepted Answer

A)  CS = $450; PS = $44,180 
B)  CS = $856,000; PS = $1,126,113 
C)  CS = $29,422; PS = $7,657 
D)  CS = $29,422; PS = $44,180

Question 12

Deadweight loss can be calculated as:

Accepted Answer

A)   , where Qe and Pe are the equilibrium quantity and price, respectively, and P(Q
D)  is the inverse demand curve. 
B)   , where Qe and Pe are the equilibrium quantity and price, respectively, and P(QS) is the inverse supply curve. 
C)   , where Qe is the quantity that would occur in a free-market equilibrium and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
D)   , where Qa denotes actual quantity, Qe is the quantity that would occur in a free-market equilibrium, and P(Q
D)  and P(QS) are inverse demand and supply, respectively.

Question 13

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?

Accepted Answer

A)  $115 
B)  $240 
C)  $125 
D)  $365

Question 14

(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 ____.

Accepted Answer

A)  D; C + D + E 
B)  D; D + C 
C)  C + D + E; D 
D)  B + C; A + B

Question 15

To calculate producer surplus:

Accepted Answer

A)  integrate the area under the demand curve and above the equilibrium price. 
B)  integrate the area under the demand curve and above the supply curve. 
C)  integrate the area under the equilibrium price and above the supply curve. 
D)  integrate the area under the supply curve.

Question 16

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 ____.

Accepted Answer

A)  $1,000,000 
B)  $200,000 
C)  $100,000 
D)  $2,000,000

Question 17

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

Accepted Answer

A)  D + E + F to B + D + F. 
B)  F to B + C + D + F. 
C)  D + E + F to A + B + D + F. 
D)  B + C + D + F to B + D + F.

Question 18

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 _____.

Accepted Answer

The answer of In a small country, the demand and...

Question 19

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

Accepted Answer

A)  B; E + F 
B)  A + B; D + F 
C)  A + B + C; D + F 
D)  B + C + E; B + C + D + E + F

Question 20

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?

Accepted Answer

The answer of Suppose the market for soda is represented...

Exam 3: Using Supply and Demand to Analyze Markets

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: 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 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 _.

Exam 3: Using Supply and Demand to Analyze Markets

In the market for used cars, the demand and supply equations are given by QD = 12,000 - 0.4P and QS = 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: 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 demand and supply curves for Fuji apples are given by QD = 50 - 6P and QS = 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 QD = 10,000 - 0.25P and QS = 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 _____.

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: 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 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?

(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 .

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 ____.

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 _.