Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 3TY
To determine
The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Two months ago, on July 1, 2019, the State of Illinois raised gasoline taxes by $.19 (19 cents) per gallon of gas.
Graphically depict the market for Illinois gasoline prior to the July 2019 increase in gasoline tax. Clearly indicate equilibrium Q and P on the graph.
(Only a graph is needed for this question)
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer.
Assume that sugar-based soft drinks are produced in a market shown on the graph above. Answer the following questions based on the information given in the graph.
(a) To reduce the consumption of sugary soft drinks, suppose the government imposes a $2 per-unit sales tax on soft drinks.
(i) Will the price of soft drinks increase by the full amount of the sales tax? Explain.
(ii) Calculate the tax revenue the government can collect from the sale of soft drinks. Show your work.
(iii) Will the consumer surplus increase, decrease, or stay the same after the tax?
(iv) Calculate the deadweight loss created by the tax. Show your work.
(b) Suppose that instead of imposing the per-unit sales tax,…
Suppose the supply of a good is given by the equation Q = −6+2P and the demand for the good is given by the equation QD = 14 - 2P, where
quantity (Q) is measured in millions of units and price (P) is measured in dollars per unit.
The equilibrium quantity in this market is 4 million
PRICE (Dollars per unit)
the following graph, plot the demand curve using the blue line (circle symbol) and plot the supply curve using the orange line (square symbol). Then
place the black point (plus symbol) at the equilibrium price and quantity. Dashed drop lines will automatically extend to both axes.
10
9
8
7
2
1
0
0
1
2
3 4 5
6
7
QUANTITY (Millions of units)
8
units and the equilibrium price is
9
10
Demand
Supply
$5.
Equilibrium
Chapter 11 Solutions
Economics: Principles & Policy
Knowledge Booster
Similar questions
- es The graph below shows the market for oats. Price per bushel 12 11 10 9 8 10 432 S 4 0 10 50 70 100¹10120 30 90 80 60 40 20 Quantity per period (in millions of bushels) S Tools Sz Prev 4 of 8 # Next >arrow_forwardOver the last 20 years there has been significant quantities of new natural gas resources discovered in the United States. For this assignment you are asked to consider what the natural gas market would have looked like prior to these discoveries, after these discoveries, and what impact these discoveries would have on prices of natural gas as well as products dependent on the natural gas market (e.g., electricity) Question 1: Please use the chart below to show what demand and supply would generically look like in a market for a natural resource such as natural gas. (Hint: the supply for a natural resource is fixed, so the supply is vertical/always then same quantity)arrow_forwardAssume that sugar-based soft drinks are produced in a market shown on the graph above. Answer the following questions based on the information given in the graph. (a) To reduce the consumption of sugary soft drinks, suppose the government imposes a $2 per-unit sales tax on soft drinks. (i) Will the price of soft drinks increase by the full amount of the sales tax? Explain. (ii) Calculate the tax revenue the government can collect from the sale of soft drinks. Show your work. (iii) Will the consumer surplus increase, decrease, or stay the same after the tax? (iv) Calculate the deadweight loss created by the tax. Show your work. (b) Suppose that instead of imposing the per-unit sales tax, the government sets a price ceiling of $7. Identify the quantity of soft drinks that will be exchanged in the market as a result of the price ceiling. Explain.arrow_forward
- A key skill in economics is the ability to use the theory of supply and demand to analyze specific markets. With this assignment, you get a chance to demonstrate your ability to apply what you have learned to the coffee market. Be sure to answer all parts of each of the scenarios below. Students may utilize Paint, Word (the shapes tool), or hand draw the graphs. Scenario 1: Suppose that, as part of an international trade agreement, the U.S. government reduces the tariff on imported coffee. Will this affect the supply or demand for coffee? Why? Which determinant of demand or supply is being affected? Show graphically with before and after curves on the same axes. How will this change affect the equilibrium price and quantity of coffee? Explain your reasoning. Scenario 2: Suppose the National Institute of Health publishes a study finding that coffee drinking reduces the probability of getting colon cancer. How do you imagine this will affect the market for coffee? Which determinant of…arrow_forwardOne of the pandemic measures adopted by the city of Regina consists of a food-delivery fee cap (maximum fee) of 14% of the pre-tax order price. This fee is charged by delivery services such as Uber Eats, DoorDash, and Skip the Dishes. Some restaurants in the city argue that the cap (in percentage terms) is to high due to the small profits earned in this industry. Represent graphically the equilibrium in the market for food (restaurants) in the city in the absence of any interventionsarrow_forwardSuppose that Raphael and Susan are the only suppliers of pieces of cake in some hypothetical market. Their annual supply schedules are given by the following table: Price (Dollars per piece) 1 2 3 4 5 PRICE (Dollars per piece) On the following graph, plot Raphael's supply of pieces of cake using the green points (triangle symbol). Next, plot Susan's supply of pieces of cake using the purple points (diamond symbol). Finally, plot the market supply of pieces of cake using the orange points (square symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right. 6 5 1 0 0 20 Raphael's Quantity Supplied (Pieces) 0 20 30 35 40 40 60 80 QUANTITY (Pieces) 100 Susan's Quantity Supplied (Pieces) 20 35 45 50 55 120 Raphael's Supply Susan's Supply Market Supply (?)arrow_forward
- For all questions, refer to the graph on the reverse side. Use this graph for 1 – 4. The graph represents the market for coffee. Estimation may be necessary, so show work. Name a good that will see increased sales due to the tariff or quota above. Name a good besides coffee that will see decreased sales due to the tariff or quota above. Suppose that 1 US$ = 1.5 South African Rand. Also, suppose that the representative good, peanut butter, is $3 per jar in the US and 4 Rand per jar in SA. How will this situation affect the exchange market for U.S. dollars? Explain/show the effect(s) of these prices. Include the initial effect(s), the market adjustment(s), and the final result(s) on equilibrium.arrow_forwardThe demand for coffee is given by the following equation, where QD�� stands for the quantity demanded and P stands for price. QD=100−4PQD= 100- 4P The supply of coffee is given by the following equation, where QS�� stands for the quantity supplied and P stands for price. QS=-10+2PQS= -10+ 2P For parts a-d, consider a graph of the demand and supply curves with price on the vertical axis and quantity on the horizontal axis. What is the slope of demand? Slope = At what price is quantity demanded equal to zero (this is, graphically, the vertical intercept of Demand)? P = What is the slope of supply? Slope = At what price is quantity supplied equal to zero (this is, graphically, the vertical intercept of Supply)? P =arrow_forwardQuestion 1 Consider a rice farmer planting two (2) types of rice, white and brown rice, concurrently in his rice field using the same resources and technology and harvesting them at the same time. Given that consumers like to mix both white and brown rice in their daily consumption, explain the effect on the white rice market when the price of brown rice increases. Support your answers with suitable white rice market diagrams. Consider a farmer that produces both white and brown rice. It is discovered that the demand for brown rice is relatively more inelastic compared to the demand for white rice. Initially the price of both white and brown rice is the same and the farmer produces the same quantity of white and brown rice. Now there is an improvement in agricultural technologies that affect both white and brown rice equally. Employ the demand and supply model to compare and contrast the effects on the equilibrium price and quantity of both white and brown rice…arrow_forward
- Recently, the price of fuel has increased in Bangladesh. At the same time the Government of Bangladesh has been allowing several producers to start car production in Bangladesh. Assume, the effect of fuel price increase is lower that that from increased number of car producers. (a) Discuss the possible effects on the equilibrium price and equilibrium quantity in the car market. (b) Graphically explain if the quantity is not reached at the equilibrium, total surplus will not be maximum.arrow_forwardAssume Diagram 1 below represents a market for tomatoes. Answer the questions below based on the graph. What market change does the graph depict? Suggest two possible reasons for the main change shown in the graph. How does the change you identified in a) above affect the equilibrium market price?arrow_forwardSuppose the demand curve for a product is given by MB = 100 - Q and the supply curve for a product is given by MC = 0.25Q, where Q is the quantity demanded/supplied in tons and MB and MC are, respectively, marginal benefit and marginal cost both expressed in US$. Use a graph to help answer the following questions and fill in your final answers in the spaces below. What is the equilibrium quantity? Q* = tons What is the equilibrium price? P* = $ What is the consumer surplus at the equilibrium quantity? CS = $ What is the producer surplus at the equilibrium quantity? PS = $arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning