7. Problems and Applications Q7Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on eachgallon of gasoline sold.Suppose they decided to impose the tax on producers.In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on producers by shifting the demand or supply curve.Price of Gasoline (Dollars per gallon)302.520SupplyDemandQuantity of Gasoline (Thousands of guilons)-O-Demand18Supply True or False: The price consumers pay will be lower if the tax were imposed on producers.O TrueO FalseIf the demand for gasoline were less elastic, this tax would beTrue or False: Consumers of gasoline are helped by this tax.O TrueO FalseWorkers in the oil industry areby this tax.effective in reducing the quantity of gasoline consumed.

Every commodity's price elasticity of demand will be elastic if there are several substitute…

Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold. Suppose they decided to impose the tax on producers. In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on producers by shifting the demand or supply curve. Price of Gasoine (Dollars per gallon) 30 2.5 20 Supply Demand O- Demand 161 Supply

Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold. Suppose they decided to impose the tax on producers. In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on producers by shifting the demand or supply curve. Price of Gasoine (Dollars per gallon) 30 2.5 20 Supply Demand O- Demand 161 Supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. How imposition of some tax on goods will affectlabor supply
Question 21 Figure #1 Price $20 18 16 14 12 10 8 6. 4 10 20 30 40 50 60 70 80 90 100 Quantity Refer to Figure #1. If the government imposes a price floor at S14. there would be a O shortage of 40 units and the law of supply would force the price falling from S14 to a lower price to get rid of the shortage O shortage of 40 units and the law of supply would force the price rising up from $14 to a higher price to get rid of the shortage O surplus of 40 units and the law of supply and demand would force the price falling from S14 to $10 to get the surplus O surplus of 40 units and the law of supply and demand are not allowed to force the price falling from $14 to $10 to clear the surplus
3. Individual and market demand Suppose that Dmitri and Frances represent the only two consumers of jeans in some hypothetical market. The following table presents their annual demand schedules for jeans: Price (Dollars per pair) 22222 10 20 30 40 50 Dmitri's Quantity Demanded Frances's Quantity Demanded (Pairs) (Pairs) 32 64 48 32 24 16 20 12 On the following graph, plot Dmitri's demand for jeans using the green points (triangle symbol). Next, plot Frances's demand for jeans using the purple points (diamond symbol), Finally, plot the market demand for jeans using the blue points (circle symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right
If the government provides a subsidy to the producers of coffee and simultaneously charges a tax on tea, which of the following can (but not necessarily wilI) happen in the market for coffee? * O The equilibrium price and quantity both decrease. O The equilibrium price increases and the equilibrium quantity decreases. O The equilibrium price stays the same and equilibrium quantity decreases. The equilibrium price stays the same and equilibrium quantity increases. O The equilibrium price decreases and the quantity stays the same. Income elasticity measures the responsiveness of changes in income to changes in price. changes in quantity demanded to a change in income. changes in quantity demanded to a change in price. changes in income to changes in supply. O All of the above.
Tips ips 3. Individual and market demand Suppose that Carlos and Deborah represent the only two consumers of iced coffee in some hypothetical market. The following table presents their monthly demand schedules for iced coffee: Price (Dollars per cup) 1 2 3 ss W 4 5 Carlos's Quantity Demanded Deborah's Quantity Demanded. (Cups) (Cups) 8 16 5 12 3 8 4 2 1 0
12. Market equilibrlum and disequilibrlum The following graph shows the monthly demand and supply curves in the market for keyboards. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Keyboards 60 I Price (Dollars per keyboard) 54 18 Supply 48 Quantity Supplied (Keyboards) 420 Quantity Demanded 1,000 42 (Keyboards) 36 30 Demand 24 18 12 6. 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Keyboards) keyboards bought and sold per month. per keyboard, and the equilibrium quantity is The equilibrium price in this market isS PRICE (Dollars per keyboard)
4. In order to reduce farm output, raise farm prices, and thus raise farm incomes (revenues), the government pays farmers to set aside a portion of their land from production. Using a graph, explain in terms of the elasticity of demand for farm products why farmers may be better-off when harvests are low even if we ignore the money they receive from the set-aside program.
3. Individual and market demand Suppose that Hubert and Kate are the only consumers of pizza slices in a particular market. The following table shows their weekly demand schedules: Price (Dollars per slice) 1 2 3 4 5 Hubert's Quantity Demanded (Slices) 8 5 3 1 0 Kate's Quantity Demanded (Slices) 16 12 8 4 2 On the following graph, plot Hubert's demand for pizza slices using the green points (triangle symbol). Next, plot Kate's demand for pizza slices using the purple points (diamond symbol). Finally, plot the market demand for pizza slices using the blue points (circle symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right.
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Consider the graph at right. Assume that before any tax, firms were willing to supply 5 thousand pounds of lobster at a price of $50 per pound. Use the line drawing tool to draw a new supply curve reflecting a $30 per pound tax. Label this line Carefully follow the instructions above, and only draw the required object Price 90 85 70 65. 65 40 55- 50 19 45 40 35 30 25 20 15 10 54 0 0 1 Quantity (thousands) www 8 10 ddu
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