Homework Answers
12) 3 (subsidy would not lead to an efficient outcome)
13) Total surplus = area bounded by demand and supply curves with Y axis
TS = 75 x 50/2 = 1875
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Price (S) 50 Quantity Figure 3 12. Refer to Figure 3. Assume that production of this good generates a $30 per unit exte...
14. Refer to Figure 3. Assume that production of this good generates a $30 per unit external cost. How much total surpl...
14. Refer to Figure 3. Assume that production of this good
generates a $30 per unit external cost. How much total surplus is
generated in this market at the efficient outcome?
a) $375
b) $675
c) $1,250
d) $2,175
Price (S) 50 50 Quantity Figure 3
Refer to Figure 4. Suppose there is a $30 external benefit associated with the production of...
Refer to Figure 4. Suppose there is a $30 external benefit
associated with the production of this good. How many of the
following policies lead to the efficient outcome?
• A $60
price floor
• A $30
price ceiling
• A $30
tax on consumers
• A $30
subsidy to consumers
a) None of these policies lead to the efficient outcome.
b) 1 of these policies leads to the efficient outcome.
c) 2 of these policies...
Price (s) 10 50 Quantity Figure 6 21. Refer to Figure 6. Suppose that the consumption...
Price (s) 10 50 Quantity Figure 6 21. Refer to Figure 6. Suppose that the consumption of this good generates a $3 external cost. How many units are consumed in equilibrium absent government regulation? a) 30 b) 40 c) 50 d) 60 22. Refer to Figure 6. Suppose that the consumption of this good generates a $3 external cost. How much total surplus is generated from the transaction of the 20th unit? a) $0 b) $1.50 c) $3 d) $4.50
Price ($) 100T Social Cost ! Private Cost 50 Quantity Figure 7 23. Refer to Figure 7, which shows a market in which the...
Price ($) 100T Social Cost ! Private Cost 50 Quantity Figure 7 23. Refer to Figure 7, which shows a market in which the production of the good generates a $45 external cost. Which area(s) represent(s) the deadweight loss associated with the competitive market outcome? a) A b) B c) C d) B+C 24. Refer to Figure 7, which shows a market in which the production of the good generates a $45 external cost. Which of the following policies would...
Price (S 100 50 25 D 500 Quantity Figure 5 20. Refer to Figure 5. How...
Price (S 100 50 25 D 500 Quantity Figure 5 20. Refer to Figure 5. How many of the following policies would a firm with market power oppose? Assume that the firm will oppose policies that lead to a reduction in producer surplus. A $60 price floor A $60 price ceiling A $30 tax on consumers A $30 subsidy to consumers a) A firm with market power will oppose 1 of the above policies b) A firm with market power...
Price (S) 100T 500 Quantity Figure 4 15. Refer to Figure 4. Suppose there is a...
Price (S) 100T 500 Quantity Figure 4 15. Refer to Figure 4. Suppose there is a $30 external benefit associated with the production of this good. What is the most that 3rd parties would be willing to pay to have either side of the market internalize the external benefit (i.e, move from the competitive market outcome to the efficient outcome)? a) $0 b) $6,000 c) $15,000 d) $21,000
Question 36 Figure 6-32 Price 20 ELENTEND 10 20 30 40 50 60 70 80 100...
Question 36 Figure 6-32 Price 20 ELENTEND 10 20 30 40 50 60 70 80 100 Quantity Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market? a shortage will develop when a price ceiling is imposed at a price of S10. a surplus will develop when a price floor is imposed at a price of $8. a surplus will develop when a price floor is imposed at a price of $12. a...
5. Consider the following $10 subsidy for producers. Figure 3: A Per-Unit Subsidy of $10 Price...
5. Consider the following $10 subsidy for producers. Figure 3: A Per-Unit Subsidy of $10 Price SUPPLY SUPPLY (With subsidy) ~ DEMAND 30 40 Quantity (a) What is the Producer Surplus under the subsidy? (5%) (b) What is the subsidy's Deadweight Loss? (5%) (c) What would the Total Surplus be under a free market? (5%)
Figure 4-5 Price (dollars per month $2,500 2.000 Demand 0 200400 800 Quantity (apartments) Figure 4-5...
Figure 4-5 Price (dollars per month $2,500 2.000 Demand 0 200400 800 Quantity (apartments) Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1.000 per month. 2) 2) Refer to Figure 4-5. Suppose that instead of a rent ceiling, the government imposed a price floor of 12,000 per month for apartments. What is the quantity of apartments demanded at the new price? B) 200 C) 300 D) 500 A) 3) Refer to...
2. Refer to Figure below and answer the following questions. The figure plots the domestic market...
2. Refer to Figure below and answer the following questions. The figure plots the domestic market demand and supply for cigarette. Assume that the size of external damage/cost per unit consumption of cigarette is estimated to be 3 dollars. 1P 10 20 30 40 50 60 70 80 90 100 110 120 2 (a) What is the equilibrium price (without any interventions)? Calculate the consumer surplus, the producer surplus, and the total surplus. (b) Find the socially optimal quantity. (c)...
14. Refer to Figure 3. Assume that production of this good
generates a $30 per unit external cost. How much total surplus is
generated in this market at the efficient outcome?
a) $375
b) $675
c) $1,250
d) $2,175
Price (S) 50 50 Quantity Figure 3
Refer to Figure 4. Suppose there is a $30 external benefit
associated with the production of this good. How many of the
following policies lead to the efficient outcome?
• A $60
price floor
• A $30
price ceiling
• A $30
tax on consumers
• A $30
subsidy to consumers
a) None of these policies lead to the efficient outcome.
b) 1 of these policies leads to the efficient outcome.
c) 2 of these policies...
Price (s) 10 50 Quantity Figure 6 21. Refer to Figure 6. Suppose that the consumption of this good generates a $3 external cost. How many units are consumed in equilibrium absent government regulation? a) 30 b) 40 c) 50 d) 60 22. Refer to Figure 6. Suppose that the consumption of this good generates a $3 external cost. How much total surplus is generated from the transaction of the 20th unit? a) $0 b) $1.50 c) $3 d) $4.50
Price ($) 100T Social Cost ! Private Cost 50 Quantity Figure 7 23. Refer to Figure 7, which shows a market in which the production of the good generates a $45 external cost. Which area(s) represent(s) the deadweight loss associated with the competitive market outcome? a) A b) B c) C d) B+C 24. Refer to Figure 7, which shows a market in which the production of the good generates a $45 external cost. Which of the following policies would...
Price (S 100 50 25 D 500 Quantity Figure 5 20. Refer to Figure 5. How many of the following policies would a firm with market power oppose? Assume that the firm will oppose policies that lead to a reduction in producer surplus. A $60 price floor A $60 price ceiling A $30 tax on consumers A $30 subsidy to consumers a) A firm with market power will oppose 1 of the above policies b) A firm with market power...
Price (S) 100T 500 Quantity Figure 4 15. Refer to Figure 4. Suppose there is a $30 external benefit associated with the production of this good. What is the most that 3rd parties would be willing to pay to have either side of the market internalize the external benefit (i.e, move from the competitive market outcome to the efficient outcome)? a) $0 b) $6,000 c) $15,000 d) $21,000
Question 36 Figure 6-32 Price 20 ELENTEND 10 20 30 40 50 60 70 80 100 Quantity Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market? a shortage will develop when a price ceiling is imposed at a price of S10. a surplus will develop when a price floor is imposed at a price of $8. a surplus will develop when a price floor is imposed at a price of $12. a...
5. Consider the following $10 subsidy for producers. Figure 3: A Per-Unit Subsidy of $10 Price SUPPLY SUPPLY (With subsidy) ~ DEMAND 30 40 Quantity (a) What is the Producer Surplus under the subsidy? (5%) (b) What is the subsidy's Deadweight Loss? (5%) (c) What would the Total Surplus be under a free market? (5%)
Figure 4-5 Price (dollars per month $2,500 2.000 Demand 0 200400 800 Quantity (apartments) Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1.000 per month. 2) 2) Refer to Figure 4-5. Suppose that instead of a rent ceiling, the government imposed a price floor of 12,000 per month for apartments. What is the quantity of apartments demanded at the new price? B) 200 C) 300 D) 500 A) 3) Refer to...
2. Refer to Figure below and answer the following questions. The figure plots the domestic market demand and supply for cigarette. Assume that the size of external damage/cost per unit consumption of cigarette is estimated to be 3 dollars. 1P 10 20 30 40 50 60 70 80 90 100 110 120 2 (a) What is the equilibrium price (without any interventions)? Calculate the consumer surplus, the producer surplus, and the total surplus. (b) Find the socially optimal quantity. (c)...
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