The firms in a perfectly competitive market for a good create pollution, the costs of which do not enterinto the firms' costs. The government decides to impose a domestic Pigovian tax, t, as a way ofaddressing this problem. Figure 11 shows this scenario.PriceP1P2P3MC5MCp+tMC-SDQ1Q2 03QuantityFigure 11: A Pigovian tax on suppliersBased on Figure 11, select the correct answer to match this description:The quantity demanded after the tax is implementeda. Q1○ b. Q₂○ C. Q3

Answer: Initially ,before imposing domestic pigovian tax the firm was in equilibirium at price P2…

Answered: The firms in a perfectly competitive…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the market for purses can be described where P is price per bag and quantity is measured as hundreds of bags per day. The government decides to levy a $2 tax on each bag of almonds to be taken at the register to capitalize on the recent increase in almond consumption. How much deadweight loss would exist in the market ?
The demand and supply of corn are as follows: Qd = 2,100 - 125P Qs = 600 + 175P, where quantities are in millions of bushels and prices are in dollars per bushel. (d) ALTERNATIVELY, assume that the government introduces a production quota of 1.35 billion bushels, i.e., Q = 1,350. Calculate: (i) the change in the consumer surplus (ii) the change in the producer surplus (iii) the deadweight loss (e) ALTERNATIVELY, assume that the government gives producers FINANCIAL INCENTIVES to limit output to 1.35 billion bushels, i.e., Q = 1,350. Calculate: (i) the change in the consumer surplus (ii) the change in the producer surplus (iii) the cost to the government (iv) the deadweight loss
Use the black point (plus symbol) to indicate the equilibrium price and quantity of VR headsets. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus. PRICE (Dollars per headset) #22 223 22 400 360 320 280 240 160 120 40 0 Demand 0 Supply 75 150 225 200 375 450 525 600 675 QUANTITY (Milions of headsets) Total surplus in this market is 5 750 million. Equilibrium A Consumer Surplus • Producer Surplus
Figure 7-8 Price Equilibrium price A B C D Q₁ E F G Equilibrium quantity Supply Demand Quantity
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Suppose that in a perfectly competitive market, the demand for Frisbees is given by Q=200-2P and the supply by Q=-70+P. Assume also that we are at an off-equilibrium price at $95. What is the deadweight loss at that particular price? 100 75 150
Rank the points (K,L,M,N) according to increasing tax cost on consumers when the government imposes a tax on suppliers.
Assume that a price floor of $320 has been implemented and there are no wasteful quality improvements. What are the total gains from trade (total surplus) with a price floor of $320? Hint: enter your answer as a number only with no $ sign Example: if the answer is $10,000, enter 10,000 2,400
18-19. In the competitive market for white sugar, consumer demand is given by P=100-0.050 and suppliers' behaviour is represented by the supply curve of P=1+0.005Q, where P is measured in dollars and Q is measured in kilos per month. Questions 17 through 19 refer to this market. 18. Imagine now that the government imposes a price ceiling of $5.00 per kilo on sugar, and that the ceiling is obeyed by all market participants. In the resulting equilibrium the total number of kilos of sugar exchanged in the market is equal to: A) 2100 G) 800 B) 2000 H) 600 A) $5 G) $70 C) 1900 I) 400 B) $10 H) $80 19. Suppose suppliers obey the price ceiling but consumers sell sugar on a black market. What will the black market price for sugar be? D) 1400 E) 1200 J) None of the above C) $10.50 I) $21 E) $50 F) 1000 D) $40 J) None of the above F) $60
Suppose Home is a small exporter of wheat. At the world price of 100 US dollars per tonne, Home growers export 20 tons of wheat. Now suppose the Home government decides to support its domestic producers with an specific export subsidy of 40 US dollars per tonne. Use Figure 1 to answer the following questions: Figure 1: Supply and Demand for Wheat at Home Home price 140 100 X 10 20 40 50 Supply Demand Quantity (a) Explain why consumer and producer surplus can be used to gauge the change in welfare caused by the export subsidy on individuals and firms.
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