Deck 8: Market Intervention

Question 1

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The price paid by buyers with the tax is

A) $2
B) $2.34
C) $2.50
D) $2.25

Answer 1

$2.34

Question 2

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2 , both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The price received by sellers with the tax is

A) $2
B) $1.50
C) $1.75
D) $1.84

Answer 2

$1.84

Question 3

Suppose the market demand function for ice cream is Q^d=10-2Pand the market supply function for ice cream is Q^s=4P-2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The consumer surplus with the tax is

A) $3
B) $1.80
C) $2
D) $1.20

Answer 3

$1.80

Question 4

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2 , both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The loss in consumer surplus due to the tax is

A) $3
B) $1.80
C) $2
D) $1.20

Question 5

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2 , both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The producer surplus after the tax is

A) $4.40
B) $5.40
C) $1.80
D) $4.92

Question 6

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2 , both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The change in producer surplus due to the tax is

A) $1.80
B) $1.20
C) $1.00
D) $0.48

Question 7

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The aggregate surplus with the tax is

A) $6.20
B) $8.80
C) $2.68
D) $8.96

Question 8

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The change in aggregate surplus due to the tax is

A) $0.16
B) $2.84
C) $1.16
D) $2.36

Question 9

Suppose the market demand function for ice cream is Q^d=10-2P and the market supply function for ice cream is Q^s=4P-2 , both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The deadweight loss due to the tax is

A) $0.16
B) $2.84
C) $1.16
D) $2.36

Question 10

The market demand function for wheat is Q^d=10-2Pand the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. How much wheat goes to waste under the program?

A) 10 billion bushels per year
B) 4 billion bushels per year
C) 6 billion bushels per year
D) None

Question 11

The market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price support program to achieve their goal. How much wheat must the government buy?

A) 10 billion bushels per year
B) 4 billion bushels per year
C) 6 billion bushels per year
D) None

Question 12

The market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. How much would the government have to pay farmers?

A) $1.5 billion
B) $3 billion
C) $4.5 billion
D) $18 billion

Question 13

The market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the deadweight loss from the program?

A) $1.5 billion
B) $3 billion
C) $4.5 billion
D) $18 billion

Question 14

he market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the producer surplus?

A) $4.5 billion
B) $13.1 billion
C) $10.5 billion
D) $6 billion

Question 15

The market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the aggregate surplus?

A) $4 billion
B) $12.6 billion
C) $10 billion
D) $6 billion

Question 16

The market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2 , both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. What is the size of the producer surplus?

A) $4 billion
B) $6 billion
C) $10.5 billion
D) $8.6 billion

Question 17

The market demand function for wheat is Q^d=10-2P and the market supply function is Q^s=4P-2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. What is the size of the aggregate surplus?

A) $4 billion
B) $8 billion
C) $10 billion
D) $12.6 billion