Question

Suppose the complexity of recent changes in the tax rules has caused an increase in demand for tax preparation services. As a result, producer surplus for tax preparation service providers will
A. increase, then decrease because the supply curve shifts to the left as the price increases.
B. decrease, then increase because the demand curve shifts to the right as the price decreases.
C. not change, since demand changes affect consumers and not suppliers
D. decrease.
E. increase

Which of the following statements is (are) correct?
(x) Price ceilings and price floors usually reduce the welfare of society because quantity demanded does not equal quantity supplied if the price control is binding.
(y) The particular price that results in quantity supplied being equal to quantity demanded is the best price because it maximizes the welfare of buyers and sellers.
(z) A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it maximizes the combined welfare of buyers and sellers.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Suppose the United States changed its laws to allow for the legal sale of a kidney. According to the textbook, which of the following statements is (are) correct?
(x) If the government allowed a free market in organs for transplant then there would be an increase in the price of a kidney and a decrease in the shortage of kidneys for transplant.
(y) At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes both producer surplus and consumer surplus.
(z) If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would benefit the rich but not the poor.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1

Answering first question as per HomeworkLib guidelines

Increase in demand causes demand curve to shift towards right. ( D --> D₁)

Producer surplus is defined as the difference between what the producer to willing to supply the good for and what they actually get paid.

Increaae in demand causes the producer surplus to increase

So E is the answer.

There is nothing in the question that suggests that the supply curve will shift due to increase in prices.