Explain the concepts of consumers' surplus and producers' surplus. Why in a competitive market social welfare is the highest at the equilibrium? Use a diagram to illustrate your answer. (b) Explain the main effects of the introduction of a specific tax on the competitive market equilibrium. How these effects depend on the elasticity of demand and supply? Use a diagram to your answer. (c) Since specific taxes introduce a possible welfare loss in a free market, would you argue against the use of this government policy? Explain.

Explain the concepts of consumers' surplus and producers' surplus. Why in a competitive market social welfare is the highest at the equilibrium? Use a diagram to illustrate your answer. (b) Explain the main effects of the introduction of a specific tax on the competitive market equilibrium. How these effects depend on the elasticity of demand and supply? Use a diagram to your answer. (c) Since specific taxes introduce a possible welfare loss in a free market, would you argue against the use of this government policy? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose the current equilibrium price of cheese pizzas is $10.00, and 11 million pizzas are sold per month. After the federal government imposes a $3.00 per pizza tax, the equilibrium price of pizzas rises to $12.00, and the equilibrium quantity falls to 9 million. Compare the economic surplus in this market when there is no tax to when there is a tax on pizza. With the tax, the change in economic surplus is O A. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium quantity. B. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. O C. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with the tax. D. the new surplus equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. New…
If the demand and supply curve for computers is: D = 200 - 5P, S = 40 + 3P Where P is the price of computers. Graph demand and supply curve by showing intersection points with both axes. Find equilibrium price and quantity. Calculate Consumer and Producer surplus by showing respective area on the graph. Analyze the market for computers if government imposes 1.2$ dollar tax for each computer sold by seller. Discuss the impact of this tax on the market and consumer surplus.
1. Give an example of a market (it can be of any good or service). 2. a) Determine a scenario where government imposes a binding quota. b) What are the consequences of this restriction on price of the good? (increase/decrease) Explain. c) What happens to economic surplus because of a)? Is there deadweight loss? d) Draw the graph. Highlight consumer surplus, producer surplus, and deadweight loss. 3. a) Determine a scenario where government imposes a binding restriction on price (ceiling or floor). b) What are the consequences of this restriction on quantity? (surplus/shortage) Explain. c) What happens to economic surplus because of a)? Is there deadweight loss? d) Draw the graph. Highlight consumer surplus, producer surplus, and deadweight loss.
What is consumer surplus? Explain in words and by drawing supply and demand curves. What is producer surplus? Explain in words and by drawing supply and demand curves. What is total surplus? What is efficiency? How and why do unfettered market forces of supply and demand maximize total surplus and lead to an efficient outcome? What are some reasons that a free market would to fail to create an efficient outcome (ie: fail to maximize total surplus)? Consider the effects of a tax on consumers on consumer and producer surplus. Does this tax increase or decrease the equilibrium price and quantity produced in the market? Does this tax increase or decrease total surplus? Consider the effects of a tax on producers on consumer and producer surplus. Does this tax increase or decrease the equilibrium price and quantity produced in the market? Does this tax increase or decrease total surplus? What is equity of an economy? Is it possible to achieve both an efficient and equitable outcome in an…
Refer to Figure A-2. The supply curve S1 and the demand curve D show the initial market equilibrium for the beer market. A $.25-per-bottle tax is on beer is placed on producers, which shifts the supply curve from S1 to S2. What is the tax revenue generated by consumers? Group of answer choices $12 15 $0.25 3
Suppose that a $8 tax in the market for ice cream cones causes the equilibrium quantity of ice cream cones to decrease by 1. If consumer tax incidence is $5, and producer tax incidence is $3, what is the deadweight loss caused by the tax? a) $3 b) $4 c) $5 d) $6
Please give a neat and step-by-step solution. Question: Given, P = 200 - 3Q P = 50 + 2Q What is the market equilibrium P and Q? If the price goes up by $10, how will the customers react? (Hint: Find PED and comment. First find new P* and Q*) If the government regulates the market by imposing 10% sales tax, what will be the change in producer surplus? Imagine there is no tax, and the market is competitive. What will be the profit maximization output level?
Suppose the government passes a rent control law. a) what is impact on consumer surplus and producer surplus. Please support answer with a graph and explain
Complete the following table, given the information presented on the graph. Result Price producers receive before tax Equilibrium quantity after tax Per-unit tax $ Value In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply. Concept A B F Tax revenue after the tax is imposed Producer surplus before the tax is imposed Consumer surplus after the tax is imposed U с U D E U
Suppose the vertical distance between points S and R represents a tax in the market. Please answer the questions under the case of the tax. What area is the tax revenue to the government? What is the amount of the tax revenue? What area is the consumer surplus represented by? What is the amount of consumer surplus? What area is the producer surplus represented by? What is the amount of producer surplus? What area is the deadweight loss represented by? What is the amount of deadweight loss? What is the buyers’ share of tax burden? What is the sellers’ share of tax burden?
Please explain
Suppose that the government has been supporting the price of corn. It's free market price is $2.50 per bushel, but the govt. has been setting a support price of $3.50 per bushel. Which of the following are ways that the government might try to reduce the size of the corn surplus? (One or more) A: Decrease the suppport price B: Institute an acreage allotment program C: Decrease demand by taxing corn purchases D: Raise the support price.