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- Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans 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. Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $50 per fan. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer…Consider the market for mountain bikes. The following graph shows the demand and supply for mountain bikes before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of mountain bikes 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. (screen shot 1) Suppose the government imposes an excise tax on mountain bikes. The black line on the following graph shows the tax wedge created by a tax of $80 per bike. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area…Use the figure below to answer the following question. Price A B E LL F S St S K K Quantity D What area represents society's total surplus after the government imposes the excise tax on the market?
- If price ceilings (like rent control) reduces surplus, do price floors increase total surplus?Use the following information to answer Questions 1 - 3 In a competitive market for whole milk, the market demand is QD = 1000 – 50P and the market supply is QS = 150P, where Q denotes the quantity in gallons and P denotes the price in dollars. [1] Calculate the competitive market equilibrium price? [2] Calculate the competitive market equilibrium quantity? [3] At the competitive market equilibrium price and quantity, calculate the value for consumer surplus? Hint: it might be helpful to construct a graph.At 10 million hours, what areas make up the total economic surplus in this market?
- The cookie demand curve slopes downward. When the price of cookies is $ 2, the quantity demanded is 100. If the price increases to $ 3, what happens to the consumer surplus?Question 21 The graph below represents the market for lightbulbs. Calculate the surplus caused by the price floor. Pr = $7 Price (5) PE=$4.50 Market for Lightbulbs QD=2080 QE=6700 as 9080 Price Floor D QuantityConsumer surplus is a measure of the difference between: a) The price which a consumer has to pay and the cost of producing the good (in a diagram, the area between the market price, and the supply curve). b) The consumer’s willingness to pay, and the cost of production (the area between the demand curve and the supply curve). c) The value which a consumer places on a unit of the good, and the market price (the area between the demand curve and the market price line). d) The marginal revenue from sales and the marginal cost of sales (the area between the marginal revenue and the marginal cost curves).
- Suppose that the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling?Consider the market for paper towels where the supply curve is upward sloping and the demand curve is downward sloping. (Hint: Draw the graphs to answer the questions below.) Suppose there is an effective price ceiling applied on this market. What happens to the consumer surplus as a result? 2. Suppose there is an effective price floor applied on this market. What happens to the consumer surplus as a result?The demand for ice cream is given by QD = 200 – 20P and the supply of ice cream is given by QS = - 100 + 40P. The quantity is measure in gallons of ice cream. - Calculate the consumer surplus, producer surplus, and total surplus at the market equilibrium. Now assume that the government decides to set the price of ice cream at $ 7.00 per gallon. Would this create a surplus or a shortage in the ice cream market? Calculate the surplus (or shortage). Calculate the consumer surplus, producer surplus, and total surplus at the new $ 7.00 price. What happened to each after the intervention of the government in the ice cream market? Calculate the deadweight loss after the imposition of the $ 7.00 price. Compare this to the deadweight loss associated with the market equilibrium. In your own words, explain why this deadweight loss is a measure of the inefficiency in the market created by the government intervention.
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