Give an example of an externality.

The figure shows the pizza market. A) If the price of a slice of 4-point pizza is $3, what is the consumer surplus of the 50th slice? B) If the price of a slice of pizza is $3, what is the producer surplus for the 50th slice of pizza? C) What is the efficient quantity? What is the equilibrium quantity? What is the loss when the equilibrium quantity is produced?

Consider the market for chocolate candy bars. Assume that it has “standard” supply and demand curves. Draw a diagram showing the market in equilibrium. Would we say that this is “efficient”? What does this mean in the context of the market model? justify. We would then like you to illustrate consumer surplus, producer surplus, tax revenue and deadweight loss in a market subject to a quantity tax diagrammatically. A similar exercise is illustrated in the Learning Materials. All you have to do is to construct an analogous case. Finally, it has been revealed that the government wants to implement the tax for public health reasons. That is, the government is not really interested in the tax revenue itself, but in reducing the consumption of candy bars to reduce obesity. Please provide answers to the following questions: Would this objective be better achieved for a market with elastic or inelastic demand? Why? Would your answer change if it transpired that the government only cared about…

Market demand is MWTP= 50 - 2Q. Market supply is MC = 4 + 2Q. Each unit transacted results in a $Q external benefit. What is the deadweight loss from the perfectly competitive market without taxes or subsidies?

Discuss how the equilibrium price and quantity change when a change in demand occurs and the supply stays constant, and when a change in supply occurs and the demand stays constant. How do price controls affect the market? Provide a real-world example that takes consumer surplus and producer surplus into consideration.

Using the supply/demand model, illustrate and explain the impact a severe outbreak of the avian flu would have in the market for poultry.

A small town provides a fireworks display, which is a public good, every fourth of July. For simplicity, assume the town only has two residents: Hayden and Madison. Their demands for the fireworks display are illustrated in the figure to the right. Construct the market demand curve for this public good. 8.00 7.50- 7.00- 6.50- 6.00- 5.50- 5.00- 4.50- Use the line drawing tool to draw the market demand curve (DMarket) for the fireworks display. Properly label this line. 4.00- DMadison DHayden 3.50- Carefully follow the instructions above, and only draw the required objects. 3.00- 2.50- P 2.00- 1.50- 1.00- 0.50- 0.00- 2 4 6 8 10 12 14 16 Quantity (number of fireworks) Price (dollars per firework)

Consider the supply & demand diagram below representing the market for food among the obese population. Understand that there is a consumption-related externality among the obese population. Before any policy is introduced, what area(s) on the chart represent consumer surplus? DEU Obese Group a MSC K d MEC b C MPC MPB=MSB Q₁ Q₂ Price P₂ 2 P₁ a C d None of the above Quantity

Market demand is MWTP= 50 - 2Q. Market supply is MC = 10 + 2Q. Each unit transacted results in a $4 external benefit. What is the deadweight loss from the perfectly competitive market without taxes or subsidies?

The restaurant industry develops an exciting new technology, a robot that quickly prepares food in half the usual time of chefs. This increases supply (producers save costs on labor) and demand (consumers find it fun to watch the robot make a meal) such that the price remains constant. However, the robot runs on coal and produces a lot of pollution, generating an external cost on production. How do consumer and producer surplus change as a result of this new technology? Choice 1 of 4:Consumer surplus increases but the change in producer surplus is indeterminateChoice 2 of 4:Producer surplus increases but the change in consumer surplus is indeterminateChoice 3 of 4:Both producer and consumer surplus increaseChoice 4 of 4:Both producer and consumer surplus decrease