Managerial Economics (MindTap Course List)
4th Edition
ISBN: 9781305259331
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 2, Problem 6MC
To determine
Example of
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An effective price ceiling:
A. Increases the quantity supplied.
B. Is set above the equilibrium price.
C. Results in a surplus.
D. Is set below the equilibrium price.
A binding price ceiling will
a. result in a product shortage.
b. result in a product surplus.
c. induce new firms to enter the industry.
d. clear the market.
One of the following would not to lead to a deadweight loss. Which one?
Select one:
a. A tax imposed on sellers when demand is downward sloping and supply is perfectly elastic
b. A price ceiling that is set below the equilibrium price
c. A subsidy paid to sellers when both demand and supply are elastic, but not infinite
d. A tax imposed on sellers when demand is perfectly inelastic
e. All the above will result to a deadweight loss
Chapter 2 Solutions
Managerial Economics (MindTap Course List)
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- Price $4 $2 $1 0 A B C Market for Good X What is the condition in the market for good X with an effective price ceiling at $2? D Supply X Demand 50 100 150 200 250 Quantity There is a surplus of 50 units. There is a surplus of 100 units. There is a shortage of 50 units. There is a shortage of 100 units.arrow_forward$2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Product Q Supply and Demand Schedule Price A What will LIKELY happen in the market for product Q if the government sets a price ceiling of $2.00? B C Quantity Supplied Quantity Demanded 1000 700 500 300 200 100 D 100 300 500 700 900 1000 There will be a surplus of 400 units. There will be a shortage of 500 units. There will be a surplus of 900 units. There will be a shortage of 900 units.arrow_forwardWhen a price ceiling is imposed on a competitive market at a level above the equilibrium price: a. the consumer surplus is reduced. producers lose some or all of the producer surplus. the total surplus is not changed by the price ceiling. both the producers and consumers lose surplus.arrow_forward
- a. Producer surplus is the difference between the market price and the minimum price a seller is willing to accept. the market price and the minimum price a buyer is willing to pay. the maximum price a buyer is willing to pay and the market price. the maximum price a seller is willing to accept and the market price. Incorrectarrow_forwardPrice Pa Pb ££ Pc Qt Q* Supply Demand Quantity The government imposes an excise tax on the market, what is the size of the tax? A) Pa-Pb B) Pa-Pc C) Pb-Pc D) Pbarrow_forwardA binding price ceiling: A. will cause quantity supplied to exceed quantity demanded. B. will set a legal minimum price in a market. C. will increase total well-being. D. will cause quantity demanded to exceed quantity supplied.arrow_forward
- The vertical distance between points A and B represents the tax in the market. 24 16 10 price $24 70 100 $16 $8 $10 S The price that seller receive after the tax is imposed is quantityarrow_forwardSuppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45 Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.arrow_forwardAs has happened in southern Chile with rains that generated heavy losses to agricultural sector, in case of potatoes, there has been a significant increase in their price. Government wants to establish a LEGAL MAXIMUM PRICE on potatoes. What are implications of this measure and how would it affect consumer and producer surplus? Justify and explain with graphs.arrow_forward
- Suppose the government imposes a price control at $1.50 per dose of the prescription drug. Think of the impact to the market after the price control is imposed on the drug. Talk about the impact on consumer and producer surplus, and the impact on dead weight loss.arrow_forwardWhen does a producer surplus occur? a. when individuals pay less than the maximum amount they would have been willing to pay for a good or service b. when producers sell a product for the exact minimum amount they would be willing to accept c. when producers sell a product for less than the minimum amount they would be willing to accept d. when producers sell a product for more than the minimum amount they would be willing to acceptarrow_forwardIn which of the following cases would government intervention in a market result in an increase in quantity sold? Levying a per-unit tax on producers Providing producers of a product with a B per-unit subsidy A E Setting a price floor above equilibrium price Setting a price ceiling above equilibrium price boowlsbr D Setting a price ceiling below equilibrium price /1arrow_forward
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