ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:The following graph plots a supply curve (orange line) for a group of recent graduates looking to sell used smart devices. Each seller has only a single
used smart device available for sale. Think of each rectangular area beneath the supply curve as the "cost," or minimum price that each seller is
willing to accept. Assume that anyone who has a cost that equals the market price is willing to sell their used smart device.
PRICE (Dollars per used smart device)
180
150
120
90
60
30
0
0
Andrew
U
Statement
1
Y
X
Beth
ロロ
04
Darnell
张 ☐
Eleanor
Jacques
ロロ
2
3
4
QUANTITY (Used smart devices)
5
Kyoko
+
6
Region X (the purple shaded area) represents total producer surplus when the market price is equal to $
area) represents
when the market price
In the following table, indicate which statements are true or false based on the information provided on the previous graph.
while Region Y (the grey shaded
Producer surplus is larger when the price is $105 than when it is $75.
Assuming each seller receives a positive surplus, Andrew will always receive more producer surplus than Beth.
True
In order for Kyoko to earn a producer surplus of exactly $45 from selling a used smart device, the market price must be $
False
O
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- Corn is a very valuable product for which the U.S. government routinely offers subsidies. With no price support, the equilibrium price for corn is $300 per ton and the equilibrium quantity is 500 million tons per year. Suppose that the government agrees to pay farmers $350 for every ton of corn they produce and can't sell in the market. According to the farmer's market supply curve, 600 million tons per year is supplied at the price of $350 a ton, so production should increase to this amount. However, domestic users of corn cut back their purchases. Only 450 million tons a year is demanded at the price of $350 a ton, and purchases decrease to this amount. Farmers continue to produce 500 million tons of corn per year, so because they produce a greater quantity of corn than domestic buyers are willing to purchase, something must be done with the surplus. To make the price support work, the government decides to buy the surplus. a. In this example, how many million tons does the…arrow_forwardEach rectangle on the graph corresponds to a particular seller in this market: blue (circe symbols) for Andrew, green (triangle symbols) for Beth, purple (diamond symbols) for Darnell, tan (dash symbols) for Eleanor, and orange (square symbols) for Jacques. (Note: The name labels are to the right of the corresponding segment on the supply curve.) Use the rectangles to shade the areas representing producer surplus for each person who is willing to sell a motor scooter at a market price of $70. (Note: If a person will not sell a motor scooter at the market price, indicate this by leaving their rectangle in its original position on the palette.) ? PRICE (Dollars per motor scooter) 160 140 120 100 180 60 40 20 0 0 Andrew 2 K Bet Darnell Jacques Eleanor 5 3 QUANTITY (Motor scooters) Market Price 6 7 8 ITI Andrew Beth Damell Eleanor 8 8 Jacquesarrow_forwardSmall engines are the main components of office and house appliances like printers, hand dryers, microwave ovens, food processors, etc. The graph depicts the market for small engines in the United States. Suppose that the government imposes a $15 tariff on each imported engine in an effort to bring manufacturing jobs back to the United States. Place the Waste shape to describe the waste of resources that would result from the trade restriction. Price (3) Incorrect 50 45 40 35 30 25 20 15 10 5 0 0 total cost: What is the total cost of the tariff? 337.5 Domestic supply Domestic demand 15 30 45 60 75 90 105 120 135 150 Quantity (millions of engines) Incorrect World supply Waste millions of dollarsarrow_forward
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