Briefly discuss a government intervention in the market that you would considered as necessary, or an intervention that, is not worth the loss of efficiency (deadweight loss) in the economy

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ECON 201 (Section E) – Homework 4 Name: Question 1: Suppose the market for cigarettes can be represented by the following demand and supply Q = 5000 – 20P Q = 40P – 400 equations: a) Find the free market equilibrium: price, quantity, CS, PS, and TS. Graph the market below. b) Suppose the government comes in and adds a tax on each box of cigarettes sold and makes consumers pay for this tax (when they buy the good). The new demand curve with tax is Q = 5000 – 20(P + 10). Graph the situation below. Calculate the new equilibrium price and quantity with the tax; how much the tax is per box of cigarettes; the new CS, PS, Tax Revenue, and TS; the DWL the tax creates (if any). i. ii. ii. iv.

During the Middle-Ages, the African city of Taghaza (located in modern day Mali and known as one of the hottest and driest places on Earth, it gets 11 millimeters of rain a year and the average high temperature from April to September is over 100 degrees) quarried salt sent to market in Timbuktu (also in Mali). With the climate being so hot and dry, locals used salt blocks for construction of buildings. Compared to other towns without salt was the demand for wood more or less elastic in Taghaza? Why?

Lucia is waiting in line to receive a free t-shirt at a charity event. Because the shirts are free, there are many people in line, and a long wait time is expected.   Consider the following sentence: By waiting in line for the shirt Lucia will miss an appointment to tutor an economics student, for which she would have been paid $30.   Which basic concept of individual choice does this sentence best illustrate? A. Externalities are a shortcoming of the market.   B. Many decisions are made on the margin.   C. People usually exploit opportunities to make themselves better off.   D. Opportunity costs and money costs (price) are related but are not always exactly the same.

What is an externality? Please give an example of the negative externality. For the flu shot, how does the positive externality shift the marginal benefit curve (the demand curve)? We know that there will be a deadweight loss if consumers purchase the underlying good, which generates positive externality at the market price. Is there a deadweight loss in this case? Why or Why not?

e. What happens when government imposes a tax of 60 cents per gallon on buyers?

Which of the following best describes the idea of market efficiency? Group of answer choices A market is efficient when government determines the price of the good. A market is efficient when there is only one seller of the good. A market is efficient when total net gains (consumer surplus + producer surplus) are maximized. A market is efficient when consumers pay low prices.