Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 17, Problem 4SPA
To determine
Total tax revenue.
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Which of the following best describes why the government is not able to decide whether it will be consumers or producers will pay a tax.
a.
The tax changes the equilibrium price, so that producers and consumers share the burden of the tax.
b.
The tax corrects an externality.
c.
Producers will always pass the entire tax onto consumers
d.
A tax on consumers will result in an increase in supply
The graph below shows the supply and demand curves for beer.
12+
11-
10
Demand
9Pe FlooT
8
7-
6-
3-
Supply
10 20 30 40 50 60 70 80 90 100 110 12
Quantity of beer
24. What is the size of consumer surplus when there is no government price control?
25. What is the size of producer surplus when there is no government price control?
26. What is the size of social surplus when there is no government price control? What is the
size of deadweight loss when there is no government price control?
27. What is the size of consumer surplus when Price Floor of $9 is imposed?
Price of beer
2.
Some economists argue that early child care generates an external benefit to society.
Consider the following supply-and-demand graph for early childhood education.
A. How does the market equilibrium differ from what is best for society?
B. If the government was going to provide a per-unit subsidy in this market in order to
achieve the socially optimal outcome, how large of a subsidy would the government ne
to provide?
C. How much in total would the government need to spend in this market each month to
achieve a socially optimal outcome?
Price
($ per month)
Supply
$1,300
$1,200
$1,000
$900
Marginal
social
benefit
Marginal
private benefit
(demand)
23 26
Quantity
(millions per month)
Chapter 17 Solutions
Macroeconomics
Ch. 17.1 - Prob. 1RQCh. 17.1 - Prob. 2RQCh. 17.2 - Prob. 1RQCh. 17.2 - Prob. 2RQCh. 17.2 - Prob. 3RQCh. 17.2 - Prob. 4RQCh. 17.3 - Prob. 1RQCh. 17.3 - Prob. 2RQCh. 17.3 - Prob. 3RQCh. 17.4 - Prob. 1RQ
Ch. 17.4 - Prob. 2RQCh. 17.4 - Prob. 3RQCh. 17.4 - Prob. 4RQCh. 17 - Prob. 1SPACh. 17 - Prob. 2SPACh. 17 - Prob. 3SPACh. 17 - Prob. 4SPACh. 17 - Prob. 5SPACh. 17 - Prob. 6SPACh. 17 - Prob. 7SPACh. 17 - Prob. 8SPACh. 17 - Prob. 9SPACh. 17 - Prob. 10APACh. 17 - Prob. 11APACh. 17 - Prob. 12APACh. 17 - Prob. 13APACh. 17 - Prob. 14APACh. 17 - Prob. 15APACh. 17 - Prob. 16APACh. 17 - Prob. 17APACh. 17 - Prob. 18APACh. 17 - Prob. 19APACh. 17 - Prob. 20APACh. 17 - Prob. 21APACh. 17 - Prob. 22APACh. 17 - Prob. 23APACh. 17 - Prob. 24APACh. 17 - Prob. 25APACh. 17 - Prob. 26APACh. 17 - Prob. 27APACh. 17 - Prob. 28APACh. 17 - Prob. 29APACh. 17 - Prob. 30APA
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- Price (dollars per pound) 6.00 5.00- 4.00- 3.00- 2.00- 1.00- 0.00+ 4. 8. 12 16 20 Quantity (billions of pounds per year) The graph shows the market for apples. The government introduces a price support for apples and sets the support price at $4.50 a pound. because 1. With the price support, the quantity produced is O A. efficient; marginal benefit equals marginal cost O B. efficient, marginal cost is less than marginal benefit O C. inefficient; this market is always inefficient O D. inefficient; marginal benefit is less than marginal cost O E. inefficient, marginal cost is less than marginal benefit 2. lose and gain from the price support. O A. Consumers and taxpayers; farmers and the government O B. Taxpayers; farmers and consumers O C. Consumers and taxpayers; farmers O D. Farmers; consumers and taxpayers 3. The deadweight loss is $ billion. >>> Answer to 1 decimal place. 4. The outcome is O A. always fair unless consumers are richer than farmers O B. fair by the fair-result view of…arrow_forward"Take a moment to thank the voluntary PBS fundraisers. The British Broadcasting Corporation (BBC) is funded by something called the "license fee," a tax of $245 per year on every household that has a television." (quote from The Federalist, August 7, 2014) Which of these two broadcasting companies has a free-rider problem? And why? PBS has a free rider problem because only people who pay taxes can watch it. BBC has a free-rider problem because only people who have TV can watch it. PBS has a free-rider problem because only viewers who choose to contribute toward the cost of its service actually pay, while others free ride. BBC has a free-rider problem because it is being funded by a compulsory f that works like a tax.arrow_forwardSuppose that at market equilibrium, the marginal private benefit is $47 and the marginal social benefit is $84. The market equilibrium is at a quantity of 23 and the efficient quantity is 32. What is the value of the deadweight loss resulting from the underproduction of this good? Do not include the $ in your answer.arrow_forward
- Suppose that at the current output level the marginal social cost of producing a good is greater than its marginal private cost, and that the marginal social benefit associated with production of the good is equal to its marginal private benefit. Which of the following government actions would most likely increase efficiency? a. Taxing the production of the good b. Taxing the production of substitute goods c. Giving tax rebates to people who purchase the good d. Subsidizing production of complementary goods e. Subsidizing consumption of the goodarrow_forwardThe graph illustrates the market for cotton. Suppose that the cotton growers use a chemical to control insects and waste flows into the town's river. The marginal social cost of producing the cotton is double the marginal private cost. If no one owns the river and the two takes no action to control the waste, what is the quantity of cotton and the deadweight loss created? If no one owns the river, the quantity of cotton produced is tons a month. 150- 125- 100- 75- 50- 25- 0- 0 Price (dollars per ton) S D 50 100 150 200 250 300 350 400 450 500 Quantity (tons per month)arrow_forwardUse the graph attached below as a starting point (either download it or print it out). Add curves, labels, etc. to this graph in order to show the following: 1. Show that this good has a $4/unit negative externality (external cost), such as pollution. 2. Shade the area that represents the Deadweight Loss (lost gains from trade) caused by the external cost. 3. Show a tax or subsidy wedge (whichever you think is appropriate) that will solve the problem of the external cost. 4. Show the socially optimal level of production that the Pigouvian tax or subsidy above will help the market to achieve. You may use software or pencil and paper to complete this graph. Upload it here when you are done.arrow_forward
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