Question 1

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

Accepted Answer

The answer of Without restrictions,the market supply curve is horizontal...

Question 2

In economics,welfare analysis focuses on

Accepted Answer

Welfare analysis in economics focuses on evaluating the efficiency and fairness of various economic policies and outcomes, not specifically on income transfer programs, food stamp programs, or international aid programs.

Question 3

While producing less than the competitive output decreases social welfare,the same cannot be said about producing more than the competitive output.

Accepted Answer

When more than the competitive output is produced each unit sold cost more than it is valued at.This reduces social welfare compared to the competitive output.

Question 4

If a city decides to lift restrictions of how many taxi cabs can operate,social welfare will increase.

Accepted Answer

Even though turning producer surplus into consumer surplus doesn't increase total welfare,the elimination of the deadweight loss that resulted from the limit does.

Question 5

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

Accepted Answer

If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, it will increase the cost of becoming a broker and reduce the incentive to enter the market. As a result, the number of brokers will decrease and the supply curve will shift to the left, resulting in higher prices and lower quantity supplied. This reduction in the number of brokers will likely reduce competition in the market, leading to reduced social welfare.

Question 6

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

Accepted Answer

By limiting the number of real estate brokers through additional requirements, the competition among brokers decreases. This typically allows existing brokers to charge higher prices for their services, leading to an increase in producer surplus. Consumer surplus usually decreases because consumers have fewer choices and may have to pay higher prices, and social welfare is likely to decrease due to the reduction in competition and market efficiency. Entry of new brokers will decrease, not increase, due to the higher barriers to entry.

Question 7

Suppose a consumer advocacy group has convinced legislators that vitamin pills should be free to consumers.Such a policy would enhance the health of the citizenry,they argue.Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting output and social welfare from such a policy.Compare this result to the competitive equilibrium.

Accepted Answer

The answer of Suppose a consumer advocacy group has convinced...

Question 8

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then consumer surplus will most likely

Accepted Answer

Limiting the number of real estate brokers would decrease competition, which would likely lead to higher prices for consumers and a decrease in consumer surplus.

Question 9

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then social welfare will most likely

Accepted Answer

Limiting the number of real estate brokers through additional requirements will likely decrease social welfare because it reduces competition, leading to higher prices and potentially lower service quality for consumers. However, the producers (real estate brokers who meet the new requirements) may benefit from reduced competition, allowing them to potentially charge higher prices and earn more.

Question 10

A new law applied to a competitive market that requires laid off workers be paid a large severance payment will

Accepted Answer

The severance payment increases the cost for firms of providing labor, leading to a decrease in labor demand and a decrease in consumer surplus in the market. The higher cost of production may also lead to higher prices for consumers, further exacerbating the decrease in consumer surplus. There may be some transfer of surplus from firms to laid off workers, but overall the policy is likely to have a negative impact on consumer surplus in the market. A deadweight loss may also be generated if the severance payment results in some firms reducing their output or exiting the market altogether.

Question 11

In economics,welfare analysis is useful to

Accepted Answer

Welfare analysis helps determine who benefits and who is harmed by a particular policy, making it useful for analyzing policy options. It does not necessarily provide a clear answer on which option is "best" as this can depend on subjective preferences and values. It is also not typically used to determine who should receive income transfers as this is more a question of social welfare or equity. "Mend it, don't end it" is a slogan rather than a policy option, so welfare analysis would not be useful for gauging its validity.

Question 12

Explain why the competitive output maximizes welfare.

Accepted Answer

The answer of Explain why the competitive output maximizes welfare....

Question 13

What is one reason existing firms might lobby the government to increase regulation in their industry?

Accepted Answer

Existing firms may lobby the government to increase regulation in their industry to increase entry and exit costs for new competitors, which helps to reduce competition and potentially increase producer surplus for existing firms.

Question 14

In 2007,the National Collegiate Athletic Association put a moratorium on new Football Bowl Series (formerly Division IA)teams.This policy will

Accepted Answer

The moratorium on new Football Bowl Series teams by the NCAA in 2007 is aimed at protecting the producer surplus of existing football programs by limiting competition. This helps maintain or potentially increase the financial benefits and market share for current teams.

Question 15

If a city decides to restrict the number of pizza parlors,

Accepted Answer

Restricting the number of pizza parlors reduces competition, likely leading to higher prices as each parlor faces less pressure to keep prices low. Higher prices can increase profits for the parlors that remain, assuming demand remains relatively inelastic. However, this reduction in competition and increase in prices can lead to a decrease in total welfare, as consumers pay more for pizza and have fewer choices, potentially leading to a loss in consumer surplus.

Question 16

As the quantity produced of a good increases,the social welfare generated by that good increases.

Accepted Answer

This only takes consumer surplus into account.Beyond the competitive equilibrium,additional units of output have less value than the cost to make them.Thus,beyond the competitive equilibrium,social welfare declines as the quantity of a good increases.

Question 17

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.This results in a deadweight loss of

Accepted Answer

Without restrictions, the market equilibrium would occur where the supply curve intersects with the demand curve:
P = 20 - Q = 5
Q = 15, P = 5
When only 10 taxi cabs are allowed in the market, the new market equilibrium occurs where the supply curve intersects with the restricted demand curve (which is the original demand curve shifted to the left by 10 units of quantity):
P = 20 - (Q+10) = 5
Q = 5, P = 15
The deadweight loss is the area of the triangle between the two equilibrium points and the demand curve:
DWL = 0.5*(15-5)*(20-15) = 12.5
Therefore, the best choice is C, which is the closest to the calculated deadweight loss.

Question 18

Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

Accepted Answer

One impact of a supply restriction is an exchange from consumers to producers.The net effect on social welfare is negative.Additionally,there is a deadweight loss.This is the additional surplus that could be generated if supply were not restricted.This effect is always negative.As a result,social welfare always declines in response to a supply restriction.

Question 19

Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk.The group argues that such a policy would save the "family farm." Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting price,output and social welfare from such a policy.Compare this result to the competitive equilibrium.

Accepted Answer

The answer of Suppose an industry trade group has convinced...

Question 20

-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.

Accepted Answer

The imposition of a quota reduces the quantity available in the market, leading to a higher price and a decrease in consumer surplus. The change in consumer surplus is calculated as the area of the triangle formed by the reduction in quantity and the increase in price, which is -250.

Quiz 9: Applying the Competitive Model

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

In economics,welfare analysis focuses on

While producing less than the competitive output decreases social welfare,the same cannot be said about producing more than the competitive output.

If a city decides to lift restrictions of how many taxi cabs can operate,social welfare will increase.

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then consumer surplus will most likely

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then social welfare will most likely

A new law applied to a competitive market that requires laid off workers be paid a large severance payment will

In economics,welfare analysis is useful to

Explain why the competitive output maximizes welfare.

What is one reason existing firms might lobby the government to increase regulation in their industry?

In 2007,the National Collegiate Athletic Association put a moratorium on new Football Bowl Series (formerly Division IA) teams.This policy will

If a city decides to restrict the number of pizza parlors,

As the quantity produced of a good increases,the social welfare generated by that good increases.

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.This results in a deadweight loss of

Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

-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.