The government has instituted a subsidy (paid to the buyers) of 3000 pounds per electric car bought in 2017. The electric car industry is competitive. Which of the following statements is true? The deadweight loss caused by the subsidy is minimal if the elasticity of supply is infinite. Buyers gain more from the subsidy than sellers if demand is more inelastic than supply. The final price paid by consumers of electric cars will increase by 3000 if supply is perfectly inelastic.

The government has instituted a subsidy (paid to the buyers) of 3000 pounds per electric car bought in 2017. The electric car industry is competitive. Which of the following statements is true? The deadweight loss caused by the subsidy is minimal if the elasticity of supply is infinite. Buyers gain more from the subsidy than sellers if demand is more inelastic than supply. The final price paid by consumers of electric cars will increase by 3000 if supply is perfectly inelastic.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Currently at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of…

A: Elasticity of demand is a concept used in economics to measure the responsiveness or sensitivity of…

Q: A rightward shift of the demand curve in a market with an upward-sloping supply curve will lead to…

A: The equilibrium occurs where the demand and supply are equal. The price prevailing at equilibrium…

Q: The market for blankets is perfectly competitive. The market price is P=$13. Market demand is Q=319…

A: When the formula will be creating an absolute value exceeding 1 the demand is elastic. When the…

Q: Consider the linear demand curve for Maize with the demand function Qd=578.66-73.17P, Given the…

A: ***Since the student has posted multiple questions, the expert is required to solve only the first…

Q: In competitive markets, the supply of a firm with no fixed costs and constant returns to scale will…

A: In a competitive market, a firm's output and pricing decision depends on itz elasticity and cost…

Q: Consumers' Surplus The demand function for a certain brand of CD is given by p = −0.01x2 − 0.3x + 19…

A: Consumer surplus is the cost they actually pay against the cost they are willing to pay. Usually,…

Q: What is the most likely reason that a movie theater would charge the same price for a popular movie…

A: The law of demand and supply explains how the interaction of demand and supply determines the price…

Q: The absolute value of the price elasticity of demand for a downward-sloping linear demand curve…

A: The quantity demanded of a good refers to the amount of good demand by the consumers at some…

Q: You manage a parking garage in a small college town. The faculty elasticity of demand is -1.33 and…

A: Given information: You manage a parking garage in a small college town. The faculty elasticity of…

Q: The price decreases from $2,000 to $1,800. Quantity demanded per year increases from 5000 to 6000…

A: Price elasticity of demand refers to the responsiveness of quantity demanded to a change in the…

Q: Assume that the Morgantown Pizza is the exclusive destination for pizzas for WVU students. In other…

A: Price elasticity of demand is a measure of the change in quantity demanded of a good or service to…

Q: The aggregate demand for a cup of coffee is given by g= 50,000 - 10,000 p, where p is the price of a…

A: The elasticity of demand measures the degree of responsiveness of demand to the change in the price…

Q: Among the following groups—senior executives, junior executives, and students—which is likely to…

A: The quantity needed of a good or service in response to a change in price is measured by price…

Q: Online the timing and tailoring of prices to specific products is the key to successful pricing in…

A: Elastic demand is the state in which demand adjusts in response to a small change in price. Price…

Q: Refer to the demand schedule below: Price Quantity ($) demanded 80 0 70 50 60 100 50 150 40 200 30…

A: Total revenue is the total amount of money a company brings in from selling its goods and services.…

Q: Along a demand curve, when the price rises from $11 to $13, the quantity demanded falls from 490 to…

A: Price elasticity of demand: It measures the percentage change in the quantity demanded for a 1%…

Q: Suppose the demand curve for a product is given by Q=14-1P+2Ps where P is the price of the product…

A: The price elasticity of demand finds the optimal pricing strategy to maximize profits and revenue of…

Q: A local government is seeking to impose a specific tax on hotel rooms. The price elasticity of…

A: The price elasticity of demand refers to the responsiveness of quantity demanded to the changes in…

Q: The long-run own-price elasticity for corn at the farm level is –0.372. Because of a late freeze in…

A: Elasticity measures the change in quantity due to change in price. Price elasticity is calculated…

Q: You are an economist for the City Subway Commission. Presently, the price of a subway ride is 80…

A: Total revenue is defined as the product of the price and the quantity. It is the revenue earned from…

Q: Which of the following is most likely to have a low price elasticity of demand? A good that is very…

A: Answer: The demand for goods that are expansive, luxurious, and goods having many substitutes will…

Q: An airline has two types of passengers: business passengers with fairly tight schedules and…

A: Part (a) To determine the price and quantity if the airline charges a single price to all…

Q: The aggregate demand for a cup of coffee in Chicago is given by q = 4,000 - 500 p, where p is the…

A: The aggregate demand for a cup of coffee in Chicago is given by q = 4,000 - 500 p where p is the…

Question

The government has instituted a subsidy (paid to the buyers) of 3000 pounds per electric car
bought in 2017. The electric car industry is competitive. Which of the following statements is true?
The deadweight loss caused by the subsidy is minimal if the elasticity of supply is infinite.
Buyers gain more from the subsidy than sellers if demand is more inelastic than supply.
The final price paid by consumers of electric cars will increase by 3000 if supply is perfectly inelastic.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define subsidy

VIEW

Step 2: Explain the correct statement

VIEW

Step 3: Explain why this option is not correct

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

and the cost function of the second firm is , where are all positive parameters. The demand function in this industry is where α C(q₁) = A * qu C(92) = Bq₂ (A, B, a, ß) Q = Dp (D,y)
When the U.S. government announced that a domestic mad cow was found in December 2003, analysts estimated that domestic supplies would increase in the short run by 10.4% as many other countries barred U.S. beef. An estimate of the price elasticity of beef demand is - 1.6 (Henderson, 2003). Assuming that only the domestic supply curve shifted, how much would you expect the price to change? If quantity increases by 10.4%, then price will V by % (Enter your response rounded to two decimal places). decrease ceiv increase respot -respot u must c our respot You must re structions to Step 1. Click d Paused Step 2. Read t Step 3. Post re tv 30 MacBook Air 80 DII DD esc F10 F1 F12 F1 F2 F3 F4 F5 F6 F7 FB F9 @ # 2$ * 1 2 3 4. 5 7 8 Q W 11
With higher fuel costs, airlines raised their average fare from $0.75 to $1.25 per passenger kilometer and the number of passenger kilometers decreased from 5 million a day to 3 million a day. What is the price elasticity of demand for air travel over this price range?
Calculate the elasticity of supply for the supply curve P=10+3Q when P=25 and Q=5
Suppose that the percentage change in supply is 15%, the price elasticity of supply is 3, and the percentage change in the equilibrium price is 3%. What is the price elasticity of demand? A) 3 B) 0 C) 1 D) 2 Suppose that the percentage change in supply is 25%, the price elasticity of demand is 1, and the percentage change in the equilibrium price is 5%. What is the price elasticity of supply? A) 2 B) 5 C) 4 D) 0 Suppose that the percentage change in demand is 16%, the price elasticity of demand is 1, and the percentage change in the equilibrium price is 4%. What is the price elasticity of supply? A) 2 B) 1 C) 3 D) 0
Since the supply curve intersects the horizontal axis, all of the points along the supply curve shown are inelastic: True or false and Explain your choice Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars. Revenue remains unchanged along a straight-line demand curve.
A bakery works out a demand function for its chocolate chip cookies and finds it to be q = D(x) = 846 - 23x, where q is the quantity of cookies sold when the price per cookie, in cents, is x. Use this information to answer parts a) through f). WWE a) Find the elasticity. E(x) = b) At what price is the elasticity of demand equal to 1? ¢ (Round to the nearest cent as needed.) c) At what prices is the elasticity of demand elastic? OA. Greater than 18¢ OB. Prices cannot be elastic in this case OC. Prices are elastic at all values D. Less than 18¢ d) At what prices is the elasticity of demand inelastic? O A. Prices are inelastic at all values OB. Less than 18¢ OC. Greater than 18¢ e) At what price is the revenue a maximum? \[ x= \] (Round to the nearest cent as needed. Use a comma to separate answers as needed.) f) At a price of13∈/per cookie, will a small increase in price cause the total revenue to increase or decrease? Increase Decrease
The MP curve indicates the relationship between ___ and the ____. A. taxes; price level B. the real interest rate; inflation rate C. monetary policy ; IS curve D. all of the above E. none of the above
The current price for a good is $20, and 90 units are demanded at that price. The price elasticity of demand for the good is - 2. When the price of the good drops by 5 percent to $19, consumer surplus increases by $. (Enter your response to the nearest penny.)
Suppose that an employee at a coffee shop is willing to work 30 hours per week when she is paid $12.00 per hour. When she is offered a raise to $14.00 per hour, she is willing to work 40 hours per week. Her price elasticity of supply is (Note: use the midpoint method and give your answer to two decimal places.)
Price(dollars per bushel) Quantity demanded(bushels) 8 2,000 7 4,000 6 6,000 5 8,000 4 10,000 3 12,000 The table above gives the demand schedule for snow peas. The demand curve for snow peas is a straight line and so the elasticity of demand is the same at all prices but not 1. 1 at all prices. higher at higher prices. lower at higher prices.
The Lerner Index informs us of what kind of goods we'd expect to see higher markups, ie. price relative to the marginal cost of production. Which of the following statement is consistent with this perspective and the implications of the Lerner Index? Firms with goods that are highly elastic would have relatively more price setting power. All of these are consistent with the implications of the Lemer Index. Firms producing necessary goods would be expected to have relatively less price setting power. Firms producing relatively inexpensive goods would have relatively more price setting power. 0 0 O O