Question 1

Figure 9.6
-Refer to Figure 9.6. Before this policy was implemented, consumer surplus was

Accepted Answer

The answer of  Figure 9.6
-Refer to Figure 9.6. Before...

Question 2

The market demand and supply functions for milk are: Q_D = 58 - 30.4P and Q_S = 16 + 3.2P. If a price floor of $1.75 is implemented, calculate the change in producer surplus. How many surplus units of milk are being produced? If the government purchases all the excess units at $1.75, calculate the milk expenditures by government? Does the increase in producer surplus due to the price floor exceed government spending on excess milk?

Accepted Answer

The answer of The market demand and supply functions for...

Question 3

Suppose the government raises the price of cheese above the market equilibrium level (P₀) by imposing a high minimum price and purchasing all of the excess supply from the market, and these quantities are destroyed. Based on the areas in the figure below, what is the deadweight loss of this program?

Accepted Answer

The answer of Suppose the government raises the price of...

Question 4

A price support may be pictured by

Accepted Answer

EPrice supports can be visualized in two ways: A) by shifting the demand curve to the right, which reflects an increase in demand due to government purchases, and E) by drawing a horizontal line at the supported price level, which indicates the minimum price at which the product will be sold, regardless of the market equilibrium.

Question 5

When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus

Accepted Answer

Price support programs typically increase producer surplus because producers receive a guaranteed price for their goods, often above the market equilibrium price. However, this comes at a cost to consumers, who pay higher prices, and the government, which incurs expenses purchasing and storing the surplus goods. The overall effect is that the gains to producers are more than offset by the losses to consumers and the cost to the government.

Question 6

Which of the following is unlikely to occur as a result of a price support program?

Accepted Answer

The answer of Which of the following is unlikely to...

Question 7

The market for semiskilled labor can be represented by the following supply and demand curves: L_D = 32000 - 4000W L_S = 8000 + 6000W, where L = millions of person hours per year, and W = the wage in dollars per hour. a. Calculate the equilibrium price and quantity that would exist under a free market. What impact does a minimum wage of $3.35 per hour have on the market? b. The government is contemplating an increase in the minimum wage to $5.00 per hour. Calculate the impact of the new minimum wage on the quantity of labor supplied and demanded. c. Calculate producer surplus (laborers' surplus) before and after the proposed change. Comment on the net effect of the proposed change upon workers as a whole and on individual workers. How does this price floor differ from an agricultural support price? d. Is the policy efficient from an economist's viewpoint?

Accepted Answer

The answer of The market for semiskilled labor can be...

Question 8

Figure 9.6
-Refer to Figure 9.6. As a result of this policy, producer surplus will be

Accepted Answer

The producer surplus is the area above the supply curve and below the price level. Based on the information provided, $4500 is the correct calculation of this area.

Question 9

What is the difference between a price support and a price floor?

Accepted Answer

A price support involves government intervention to maintain a minimum price by buying up excess supply, whereas a price floor is a legally established minimum price above which the market price cannot fall, but does not necessarily involve government purchase of excess supply.

Question 10

The market demand and supply functions for pork are: Q_D = 2,000 - 500P and Q_S = 800 + 100P. To help pork producers, the U.S. Congress is considering legislation that would put a price floor at $2.25 per unit. If this price floor is implemented, how many units of pork will the government be forced to buy to keep the price at $2.25? How much will the government spend in total? How much does producer surplus increase?

Accepted Answer

The answer of The market demand and supply functions for...

Question 11

Figure 9.6
-Refer to Figure 9.6. Before this policy was implemented, producer surplus was

Accepted Answer

The answer of  Figure 9.6
-Refer to Figure 9.6. Before...

Question 12

Figure 9.6
-Refer to Figure 9.6. As a result of this policy, quantity will

Accepted Answer

The policy likely increases demand or supply, leading to a higher equilibrium quantity of 600.

Question 13

When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, the impact on total welfare is the

Accepted Answer

The total welfare impact of the price support program includes the change in consumer surplus and the change in producer surplus. However, it also includes the cost to the government, which is negative because it represents a loss to taxpayers. Therefore, the correct answer is the change in consumer surplus + the change in producer surplus - the cost to government.

Question 14

Suppose the government raises the price of cheese above the market equilibrium level (P₀) by imposing a high minimum price and purchasing all of the excess supply from the market, and these quantities are destroyed. Based on the areas in the figure below, what is the cost of this program to the government?

Accepted Answer

The answer of Suppose the government raises the price of...

Question 15

Consider a competitive market with supply and demand curves expressed as:
Supply P = 5 + 0.036Q Demand P = 50 0.04Q,
where P represents unit price in dollars and Q represents sales rate in units per day.
a. Determine the equilibrium price and sales rate.
b. If this were the labor market for low skilled workers, what would be the loss in consumer surplus (purchaser surplus) when the minimum wage is set at $40 per day (an eight hour day)?
c. What is the loss or gain in producer surplus (seller surplus) in part b. above?

Accepted Answer

The answer of Consider a competitive market with supply and...

Question 16

Figure 9.6
-Refer to Figure 9.6. As a result of this policy, consumer surplus will

Accepted Answer

The policy shifts the price from P1 to P2, which reduces consumer surplus from the area above P1 but below the demand curve to the area above P2 but below the demand curve. The reduction in consumer surplus is the shaded triangle above P2, below the demand curve, and to the left of the vertical line at Q2. This area has a height of $750 (the difference between P1 and P2) and a base of 3 units (the difference between Q1 and Q2). Therefore, the reduction in consumer surplus is $2250.

Question 17

Suppose the government raises the price of cheese above the market equilibrium level (P₀) by imposing a high minimum price and purchasing all of the excess supply from the market, and these quantities are destroyed. Based on the areas in the figure below, what is the change in consumer surplus after this policy is adopted?

Accepted Answer

By raising the price above the equilibrium level, the quantity demanded decreases (from Q1 to Q2) and the quantity supplied increases (from Q1 to Q3), creating excess supply (Q3-Q2). The government purchases this excess supply and destroys it, which creates a deadweight loss. The loss to consumer surplus is the sum of areas A and B, so consumers lose area A+B.

Question 18

A country's government would like to raise the price of one its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans?

Accepted Answer

All of the options listed would contribute to raising the price of coffee beans. An import quota (A) limits the quantity of coffee beans that can be imported, reducing supply. An acreage limitation program (B) reduces the amount of coffee beans produced domestically by incentivizing farmers to leave some of their land idle, also reducing supply. An import tariff (C) increases the cost of imported coffee beans, making them more expensive and potentially reducing their supply in the domestic market. All these measures reduce the overall supply of coffee beans in the market, which, according to the law of supply and demand, would lead to higher prices.

Question 19

Suppose the government raises the price of cheese above the market equilibrium level (P₀) by imposing a high minimum price and purchasing all of the excess supply from the market, and these quantities are destroyed. Based on the areas in the figure below, what is the change in producer surplus after this policy is adopted?

Accepted Answer

The answer of Suppose the government raises the price of...

Question 20

Figure 9.6
-Refer to Figure 9.6. The government policy pictured is

Accepted Answer

The answer of  Figure 9.6
-Refer to Figure 9.6. The...

Quiz 9: The Analysis of Competitive Markets

Figure 9.6 -Refer to Figure 9.6. Before this policy was implemented, consumer surplus was

A price support may be pictured by

When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus

Which of the following is unlikely to occur as a result of a price support program?

Figure 9.6 -Refer to Figure 9.6. As a result of this policy, producer surplus will be

What is the difference between a price support and a price floor?

Figure 9.6 -Refer to Figure 9.6. Before this policy was implemented, producer surplus was

Figure 9.6 -Refer to Figure 9.6. As a result of this policy, quantity will

When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, the impact on total welfare is the

Figure 9.6 -Refer to Figure 9.6. As a result of this policy, consumer surplus will

A country's government would like to raise the price of one its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans?

Figure 9.6 -Refer to Figure 9.6. The government policy pictured is