26Price2422201816Supply1412108642+Demand Social ValueHI2 4 6 8 10 12 14 16 18 20 22 QuantityHow large would the subsidy need to be to internalize the externality?Less than $2○ $2O More than $2O The size of the subsidy cannot be determined from the figure.

The Power of Externalities: Understanding Subsidies and Social OptimumImagine a scenario - a local…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the supply and demand schedules for a local electric utility are as follows:Price 17 16 15 14 13 12 11Quantity supplied 9 7 5 3 1 - -Quantity demanded 3 4 5 6 7 8 9The price is in cents per kilowatt hour (kWh), and the quantity is millions of kilowatt hours. The utilitydoes not operate at prices less than 13 cents per kWh.(a) Using graph paper and a ruler, or a computer spreadsheet or presentation program, carefully graphand label the supply curve for electricity.(b) On the same graph, draw and label the demand curve for electricity.(c) What is the equilibrium price of electricity? The equilibrium quantity? Label this point on yourgraph.(d) At a price of 17 cents per kWh, what is the quantity supplied? What is the quantity demanded? Whatis the relationship between quantity supplied and quantity demanded? What term do economists useto describe this situation?(e) At a price of 14 cents per kWh, what is the relationship between quantity supplied and quantitydemanded? What…
Figure 8-5 Suppose that the government imposes a tax of P3 - P1. P4 P3 P2 Pl Price F. 4 CO OA. O F G D+H. 02 OC+H. 2 H I Q1 Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area Supply Demand Quantity
Suppose Home is a small exporter of wheat. At the world price of 100 US dollars per tonne, Home growers export 20 tons of wheat. Now suppose the Home government decides to support its domestic producers with an specific export subsidy of 40 US dollars per tonne. Use Figure 1 to answer the following questions: Figure 1: Supply and Demand for Wheat at Home Home price 140 100 X 10 20 40 50 Supply Demand Quantity (a) Explain why consumer and producer surplus can be used to gauge the change in welfare caused by the export subsidy on individuals and firms.
Price 18 16 14 12 10 8 4 1 1 Market for Computer Games HH H 1 1 1 1 1 1 There is no surplus quantity 30 45 15 1 1 1 0+ 0 5 10 15 20 25 30 35 40 45 Quantity 1 H 1 1 I 1 1 50 55 60 65 70 75 Consider the market for computer games in the graph above. The quantity supplied decreases by 15 games at each price as a result of an increase in input costs. After the supply decreases, the government sets a price floor at $12 per game. What is the resulting surplus quantity from this policy (considering the new supply curve)?
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer handbags in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. PRICE (Dollars per handbag) 500 450 400 Demand 350 300 250 200 Before Tax Supply 150 100 50 0 0 160 320 480 640 800 960 1120 1280 1440 1600 QUANTITY (Handbags) + Equilibrium Consumer Surplus Producer Surplus ?
37 $50 Supply $40 t of $30 E $20 F Price $10 Ceiling Demand $0 40 80 120 160 200 Quantity In the market shown in the diagram above, the government has imposed a Price Ceiling at $10. Assuming the original equilibrium at point E was socially optimal, the Deadweight Loss from the Price Ceiling would be Select one: а. $800 b. $200 c. $100 d. $400 Price
Refer to the accompanying figure. Price ($) 10 00 8 2 Show Transcribed Text Multiple Choice If this market is unregulated, total economic surplus is $48. $20. $84. $32. S D 12 16 20 8 Quantity
1.00 0.90 0.80 0.70 0.60 0.50 Supply 0.40 0.30 Domand 0.20 0.10 50 100 150 200 250 400 300 350 If a price ceiling of $0.30 is imposed, what is the new consumer surplus? Oa. 50 Ob. 75.5 Oc. 45 Od. 67.50
Price $10 ∞o 9 5 4 3 2 0 Demand 10 20 Subsidy Supply 30 40 50 60 70 80 90 100 Quantity Total gains from trade: $ a. Without the subsidy, what are the total gains from trade?
1.00 0.90 0.80 0.70 0.60 Supply 0.50 0.40 0.30 Demand 0.20 0.10 50 100 150 200 250 350 400 300 Suppose that a price ceiling of $0.30 is imposed, what is the deadweight loss? a. 15 Ob. 30 Oc. 25 d. 20
8. a. b. C. Price d. P S P 0 P. A d H B E I area H. FG J 20 D Q1 Refer to Excise Subsidy. After the subsidy is granted, producers' surplus equals area A + B + E + H. area E + H+F+I. area B + C + E + H. S S + Subsidy D Quantity
85 8 75- 7 65- 6 55- 5- 45 4 35 3 2.5 2 15 1 05 Price 200 500 650 tax of $2 per unit subsidy of $2 per unit O tax of $1.50 per unit Social Cost subsidy of $1.50 per unit Private Cost Demand In order for the government to intervene successfully, it must use a Quantity

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26 Price 24 22 20 18 16 Supply 14 12 10 8 6 4 2+ Demand Social Value HI 2 4 6 8 10 12 14 16 18 20 22 Quantity How large would the subsidy need to be to internalize the externality? Less than $2 ○ $2 O More than $2 O The size of the subsidy cannot be determined from the figure.