Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 27, Problem 5E
To determine
To explain:
The result of reversing the private cost and
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A city passes a law that automobile prices may not increase. The auto market is currently in equilibrium. What will happen in that market if costs of producing autos increase?
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a
More than the allocatively efficient amount will be produced.
b
Less than the allocatively efficient amount will be produced.
c
The allocatively efficient amount will be produced but there will be a shortage.
d
The allocatively efficient amount will be produced but there will be a surplus.
In a market, the consumer surplus is 800,000 units and the producer surplus is 100,000. Which of the following statement is true?
Group of answer choices
The market is efficient since marginal benefit is equal to marginal cost.
The market is inefficient since consumer surplus is greater than producer surplus and marginal benefit is equal to marginal cost.
The market is efficient since consumer gain more than the producer.
The market is inefficient since consumer surplus is greater than producer surplus.
then letting the market determine the price level and equilibrium amount is the most appropriate decision because the total surplus of consumers and producers is the most minimal
the statement above is true/false?
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- options for blank three drop down: efficient allocation OR over-provision OR under-provisionarrow_forward1. In Town A there is only one newspaper, Daily Outrage. The demand for the paper depends on the price and the amount of scandal reported. The demand function is Q = 15SP-3 where Q is the number of issues sold per day, S is the number of column inches of scandal reported in the paper, and P is the price. Scandals are not a scarce commodity in town A, but it takes resources to write, edit, and print stories of scandal. The cost of reporting S units of scandal is £10S and is independent of the number of papers sold. In addition, the cost to print and deliver the paper is £0.10 per copy and is independent of the amount of scandal reported in the paper. (a) Calculate the price elasticity of demand. Explain whether the price elasticity depends on the amount of scandal reported and whether the price elasticity is constant over all prices. Comment on the price sensitivity of the readers of the Daily Outrage. (b) Calculate the profit maximising price using the formula that writes marginal…arrow_forwarda. Does the market provide an efficient amount of effort? b. The teacher of the course is considering to implement a tax-cum-subsidy policy in order to enhance effort in the course. Suppose he seeks advice from you. He proposes to subsidize effort at the rates, meaning that putting G, units of time into working on the problem sets will feel less, concretely, only like putting (1-s)G, units of time. In order to subsidize effort, he will tax students' time at the rate t, so the total available time will become(1-1)W₁. What tax-subsidy combination would you propose in order to implement the social optimum while keeping budget balance?arrow_forward
- If the daily demand curve for gasoline is as provided in the graph above, then how much consumer surplus would consumers receive if the market price for gasoline were $3.00 per gallon? What about for a price of $4.00 per gallon? As a reminder, the formula for the area of a triangle is (1)/(2) * base* height◆◆ What does this say about how consumer welfare changes if the supply of gasoline decreases? Price per Gal. of Gasoline ($USD) 5.50- 5.00- 4.50++ 4.00++ 3.50 3.00 2.50 2.00 A 0 I B C 2 Demand Curve for Gasoline D E F G Demand Curve H 40 50 60 70 80 80 90 100 110 Gal. of Gasoline Purchased (Millions)arrow_forwardThe United States government subsidizes many so-called green companies. For instance, it has given millions of dollars to solar panel companies. In the market for solar power, illustrate what the government subsidies mean.arrow_forwardThis question doesn’t involve any numerical calculation. The USDA considers investing in R&D to make production less costly. The supply function of Cabbage is perfectly elastic. a. Draw the supply and demand for cabbage in the market before and after the investment in R&D.b. Mark with letters (A, B, C, D, …) the relevant intersections of the supply and demand curves and indicate what is the consumer surplus, what is the producer surplus, and what is the social surplus.arrow_forward
- It’s increasingly clear that many postings on blogs and product reviews on Web sites are fake or are posted there to manipulate consumers’ opinions. How big a problem is this if consumers increasingly look to consumer-generated product reviews to guide their purchase decisions? What steps, if any, can marketers take to nip this problem in the bud?arrow_forwardWhat is the term used to describe the situation where resources are allocated in a way that maximizes total surplus? A. Pareto efficiency B. Market equilibrium C. Social welfare D. Deadweight lossarrow_forwardThe costs or benefits of a market activity that affect a third party are called: A) externalities. B) public goods. C) common resource goods. D) artificially scarce (or club) goods.arrow_forward
- Match each type of good with its associated market efficiency outcomearrow_forwardIf the daily demand curve for gasoline is as provided in the following graph, then how much consumer surplus would consumers receive if the market price for gasoline was $1.60 per litre? What about for a price of $1.20 per litre? Price ($ per litre) $3.00 $1.60 $1.20 040 120 200 280 Demand 360 440 Quantity of gasoline (millions of litres)arrow_forwardThe market for widgets can be described by the following equations: Demand: P = 10 -Q 3. Supply: P = Q-4 Equilibrium price is $3 and equilibrium quantity is 7. a) Suppose that government imposes a tax of s0.5 per unit to reduce widget consumption. What will the new equilibrium and quantity be? b) What price will the buyer pay?arrow_forward
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