Question

500 1000 1500 16) The above figure shows the demand and supply curves in the market for milk. If the government imposes a quota at 500 gallons, calculate the change in the consumer surplus. Assume that prices stay the same. A) ACS--150 D) ACS- 200 C) ACS--500 B) aCS--250 a, 17) The above figure shows supply and demand curves for milk. In an effort to help farmers, the passes a law that establishes a s3 per gallon price support. To maintain the price support, govemment expenditures must equal A)f+g+h+i+j + k. C)k+i D)f+g+h+i+j. 18) The above figure shows supply and demand curves f specific tax, the loss in social welfare will equal A) b+c+f+g. B)f+g C)b+f 19) A minimum wage is an example of a A) quantity quota. C) price ceiling B) price floor. D) free market equilibrium 20) If all conditions for a perfectly competitive market are met, A) firms' demand curves are horizontal. B) firms face sunk cost when entering the market. C) the market demand curve is horizontal. D) the firms' demand curves are downward-sloping. 21) If a firm operates in a perfectly competitive market, then A) no firms will advertise. B) all firms will advertise.

Answer 1

16) b

Decrease in consumer surplus= 0.5*(4-3)(1000-500) = 250

17) A

Cost of government is equal to the expenditure incurred to purchase the excess supply.

18) B

triangle f+g shows deadweight loss.

19) b

Minimum price is an example of price floor.