Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 2, Problem 6MC
To determine
Example of
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Students have asked these similar questions
A binding price ceiling will
a. result in a product shortage.
b. result in a product surplus.
c. induce new firms to enter the industry.
d. clear the market.
One of the following would not to lead to a deadweight loss. Which one?
Select one:
a. A tax imposed on sellers when demand is downward sloping and supply is perfectly elastic
b. A price ceiling that is set below the equilibrium price
c. A subsidy paid to sellers when both demand and supply are elastic, but not infinite
d. A tax imposed on sellers when demand is perfectly inelastic
e. All the above will result to a deadweight loss
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Product Q Supply and Demand Schedule
Price
A
What will LIKELY happen in the market for product Q if
the government sets a price ceiling of $2.00?
B
C
Quantity Supplied Quantity Demanded
1000
700
500
300
200
100
D
100
300
500
700
900
1000
There will be a surplus of 400 units.
There will be a shortage of 500 units.
There will be a surplus of 900 units.
There will be a shortage of 900 units.
Chapter 2 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- When a price ceiling is imposed on a competitive market at a level above the equilibrium price: a. the consumer surplus is reduced. producers lose some or all of the producer surplus. the total surplus is not changed by the price ceiling. both the producers and consumers lose surplus.arrow_forwarda. Producer surplus is the difference between the market price and the minimum price a seller is willing to accept. the market price and the minimum price a buyer is willing to pay. the maximum price a buyer is willing to pay and the market price. the maximum price a seller is willing to accept and the market price. Incorrectarrow_forwardPrice Pa Pb ££ Pc Qt Q* Supply Demand Quantity The government imposes an excise tax on the market, what is the size of the tax? A) Pa-Pb B) Pa-Pc C) Pb-Pc D) Pbarrow_forward
- The vertical distance between points A and B represents the tax in the market. 24 16 10 price $24 70 100 $16 $8 $10 S The price that seller receive after the tax is imposed is quantityarrow_forwardSuppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45 Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.arrow_forwardAs has happened in southern Chile with rains that generated heavy losses to agricultural sector, in case of potatoes, there has been a significant increase in their price. Government wants to establish a LEGAL MAXIMUM PRICE on potatoes. What are implications of this measure and how would it affect consumer and producer surplus? Justify and explain with graphs.arrow_forward
- Qd = 1,600 - 125P Qs = 440 + 165P Quantities are measured in millions of bushels; prices are measured in dollars per bushel. a. Calculate the equilibrium price and quantity that will prevail under a completely free market. b. Calculate the price elasticities of supply and demand at the equilibrium values. c. The government currently has a $4.50 bushel support price in place. What impact will this support price have on the market? Will the government be forced to purchase corn under a program that requires them to buy up any surpluses? If so, how much? 1四 "cause" causesarrow_forwardWhen does a producer surplus occur? a. when individuals pay less than the maximum amount they would have been willing to pay for a good or service b. when producers sell a product for the exact minimum amount they would be willing to accept c. when producers sell a product for less than the minimum amount they would be willing to accept d. when producers sell a product for more than the minimum amount they would be willing to acceptarrow_forwardIn which of the following cases would government intervention in a market result in an increase in quantity sold? Levying a per-unit tax on producers Providing producers of a product with a B per-unit subsidy A E Setting a price floor above equilibrium price Setting a price ceiling above equilibrium price boowlsbr D Setting a price ceiling below equilibrium price /1arrow_forward
- do fast.arrow_forwardThe area underneath a demand curve down to the equilibrium price is: a. consumer surplus b. always less than the area under the supply curve c. always greater than the area under the supply curve d. producer surplusarrow_forwardA price ceiling: a. would be imposed if the government believes the market equilibrium price is too low. b. is the lowest price that the law will allow to be charged in the market. c. is the price that must be charged in the market. d. is the highest price that the law will allow to be charged in the market.arrow_forward
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