Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 12, Problem 2CQQ
To determine
The deadweight loss and tax revenue.
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Students have asked these similar questions
Carrie is willing to pay $1400 for the new Samsung Galaxy phone. Samsung is selling the new Galaxy phone for $1200. It costs Samsung $600 to produce this phone. The total economic surplus if Carrie purchases this phone is $________.
The market for wheat is perfectly competitive with the typical market demand and supply curves.
The government imposes a binding minimum price of wheat on the market. The government promises to buy
any resulting excess supply of wheat. However, because they just keep it in a warehouse, the Marginal Benefit
of any wheat the government buys is zero. With the minimum price and the government buying excess supply,
Consumer Surplus _____ and Market Surplus _____.
A. increases; says the same or increases.
B. increases; increases.
C. could increase or decrease; decreases.
D. could increase or decrease; stays the same or increases.
E. stays the same; decreases.
Carrie is willing to pay $1400 for the new Samsung Galaxy phone. Samsung is selling the new Galaxy phone for $1200. It costs Samsung $600 to produce this phone. The total economic surplus if Carrie purchases this phone is $________.
Im not sure which one is right one individual said
onsumer surplus = 1/2(willing to pay - selling price ) *quantity
CS = 1/2 ( 1400 - 1200) *1
CS = 100
Producer surplus = 1/2( selling price - willing to receive)*quantity
PS = 1/2 ( 1200-600)*1
PS =300
total economic surplus = PS +CS = 400
and another said
According to the given information, total economic surplus would be:
=12×Maximum willingness to pay-Minimum Willingness to accept×quantity sold=12×$1400-$600×1=$400=$800
Chapter 12 Solutions
Principles of Microeconomics
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- The graph shown portrays a subsidy to buyers. After the subsidy is in place, the post-subsidy price paid by buyers is post-subsidy price received by sellers is _________ the difference between these two figures is the amount of_ P 46 40 30 24 A $30; $46; the subsidy (B) $24; $40; government revenue C$24; $40; the subsidy (D) $40; $24; the subsidy E₁ 100 E2 150 S -D2 D. and thearrow_forward4arrow_forwardThe equilibrium price of a good is $30. Supply of this good is more elastic than demand. 5uppase the government introduces a tax on the good. in this case, the price receved by producers is $24, and the price paid by consumers is 1.6 times more.Calculate the tax cost per good for the group bearing most of the tax burden if necessary, round any intermediate calculations and your final answer to two decimal places. $______arrow_forward
- Question 4 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 X 40 140 100 10 20 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. (b) What is the quantity exported by Home under free trade and with the export subsidy? (c) Calculate the effect of the export subsidy on consumer surplus, producer surplus and government revenue; depict each of these in a graph. What is the overall net effect of the export subsidy on Home welfare?arrow_forwardOnly typed answerarrow_forwardSuppose the market demand for milk is Qd = 40 – 4P Where Qd is millions of gallons demanded and P is price per gallon. Suppose the market supply for milk is Qs = - 40/3 + 20/3P Suppose a tax of $1 per gallon of milk is imposed in this market. What is the new price paid by consumers and What is the quantity of milk sold? *Hint: It does not matter if the tax is collected from purchasers or sellers.arrow_forward
- Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown in the accompanying figure. If the government provides a subsidy of $500 per ton, then the cost of subsidy, which must be borne by taxpayers, will be ______ per day. A.) $500 B.) $2,000 C.) $5,000 D.) $6,000arrow_forward1. The equilibrium price of juice was initially $1.80 per bottle, and the equilibrium quantity was 8,000 bottles per day. When the government imposed a tax of $0.50 per bottle, the price went up to $2.18 per bottle, and quantity fell by 12%. A) How much of the tax (in $/bottle) are the buyers paying? B) How much of the tax (in $/bottle) is shouldered by the sellers? C) After the tax is imposed, how many bottles will be consumed?arrow_forward(e) Draw a demand and supply diagram with a tax on the sale of the good. Show the quantity sold with and without the tax. Illustrate the price buyers pay and the price sellers receive with and without the tax. Illustrate and explain how the tax results in a deadweight loss.arrow_forward
- 1arrow_forward1. With the same percentage tax being imposed, will the deadweight loss be greater on Super Bowl tickets or airline tickets? Explain. 2. Provide an example of whether the Laffer Curve could be applicable to influencing how much you would want to work at a job. Explain. 3. You just bought the 65 inch 4k tv you've wanted for $50! What's your consumer surplus? Why? 4. Rancher Ruby is a highly efficient cattle rancher and she just sold 500 pounds of hamburger for $5 per pound when she would have sold it for $2 per pound. What's Ruby's total producer surplus?arrow_forward39arrow_forward
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