Question

1) Taking money from a wealthy individual to feed a destitute family would be a Pareto improvement a. True b. False Use the following to answer the next 4 questions The graph below shows the demand for cheesecake. The price of cheese cake is $8 per slice PRICE Dollars per slicel 16.00 10 20 30 40 50 60 70 80 QUANTITY ISlices per monthl Help Clear All 2) Total surplus (consumer + producer surplus) is a. 120 b. 160 C. 180 d. 200 e. none of the above Suppose the local government in an attempt to curb consumption of sugary foods, imposes a tax of $2 per slice to be collected from the supplier. PRICE (Dollars per sticel 16.00 14.00 Demand 0 10 20 30 40 50 60 70 80 QUANTITY ISlices per monthl Help Clear All 3) The inefficiency of the tax as measured by the loss of total surplus is a. 15 b. 25 c. 10 d. 20 e. none of the above

Answer 1

1. True because taking money from wealthy individual to feed a poor family will not put him in the worse off situation so it is pareto improvement.

2. consumer surplus = 0.5 × 4× 40 = 80

Producer surplus = 0.5× 4 × 40 = 80

Total surplus = 160

Option B is correct

3. Deadweight loss = 0.5×2×(40-25)=15

Option A is correct