Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 4.A, Problem 7PA
To determine
The
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Suppose that you are the vice president of operations of a manufacturing firm that sells an industrial lubricant in
a competitive market. Further suppose that your economist gives you the following supply and demand
functions:
Demand:
= 50 – 2P
Supply:
Q° = - 10 +P.
What is the consumer surplus in this market?
Consumer surplus is $
(Enter your response rounded to two decimal places.)
What is the producer surplus?
Producer surplus is $
(Enter your response rounded to two decimal places.)
Assume the market for peanut butter is competitive with normally sloped supply and demand curves and the market is currently in equilibrium. If there is a decrease in supply resulting in a new market equilibrium, will the amount of consumer surplus increase, decrease, or remain unchanged relative to the amount of consumer surplus found at the initial market equilibrium?
Suppose that the demand for broccoli is given by:
Q=1000-5P
where Q is quantity per year measured in hundreds of bushels and P is the price in dollars per hundred bushels. The long-run supply curve for broccoli is given by:
Q=4P-80
Show that the equilibrium quantity here is Q= 400. At this output, what is the equilibrium price? How much in total is spent on broccoli? What is consumer surplus at this equilibrium? What is producer surplus at this equilibrium?
How much in total consumer and producer surplus would be lost if Q= 300 instead of Q= 400?
Show how the allocation between suppliers and demanders of the loss of total consumer and producer surplus described in part (b) depends on the price at which broccoli is sold. How would the loss be shared if P= 140? How about if P= 95?
What would be the total loss of consumer and producer surplus if Q= 450 rather than Q= 400? Show that the size of this total loss also is independent of the price at which the broccoli is sold.
Now suppose the…
Chapter 4 Solutions
Microeconomics (7th Edition)
Ch. 4.A - Prob. 1RQCh. 4.A - Prob. 2RQCh. 4.A - Prob. 3RQCh. 4.A - Why would economists use the term deadweight loss...Ch. 4.A - Prob. 5PACh. 4.A - Prob. 6PACh. 4.A - Prob. 7PACh. 4.A - Prob. 8PACh. 4.A - Prob. 9PACh. 4 - Prob. 1TC
Ch. 4 - Prob. 2TCCh. 4 - Prob. 4.1.1RQCh. 4 - Prob. 4.1.2RQCh. 4 - Prob. 4.1.3RQCh. 4 - Prob. 4.1.4RQCh. 4 - Prob. 4.1.5PACh. 4 - Prob. 4.1.6PACh. 4 - Prob. 4.1.7PACh. 4 - Prob. 4.1.8PACh. 4 - Prob. 4.1.9PACh. 4 - Prob. 4.1.10PACh. 4 - Prob. 4.1.11PACh. 4 - Prob. 4.1.12PACh. 4 - Prob. 4.1.13PACh. 4 - Prob. 4.1.14PACh. 4 - Prob. 4.2.1RQCh. 4 - Prob. 4.2.2RQCh. 4 - Prob. 4.2.3PACh. 4 - Prob. 4.2.4PACh. 4 - Prob. 4.2.5PACh. 4 - Prob. 4.2.6PACh. 4 - Prob. 4.2.7PACh. 4 - Prob. 4.2.8PACh. 4 - Prob. 4.2.9PACh. 4 - Prob. 4.2.10PACh. 4 - Prob. 4.3.1RQCh. 4 - Prob. 4.3.2RQCh. 4 - Prob. 4.3.3RQCh. 4 - Prob. 4.3.4RQCh. 4 - Prob. 4.3.5PACh. 4 - Prob. 4.3.6PACh. 4 - Prob. 4.3.7PACh. 4 - Prob. 4.3.8PACh. 4 - Prob. 4.3.9PACh. 4 - Prob. 4.3.10PACh. 4 - Prob. 4.3.11PACh. 4 - Prob. 4.3.12PACh. 4 - Prob. 4.3.13PACh. 4 - Prob. 4.3.14PACh. 4 - Prob. 4.3.15PACh. 4 - Prob. 4.3.16PACh. 4 - Prob. 4.3.17PACh. 4 - Prob. 4.3.18PACh. 4 - Prob. 4.3.19PACh. 4 - Prob. 4.4.1RQCh. 4 - Prob. 4.4.2RQCh. 4 - Prob. 4.4.3RQCh. 4 - As explained in the chapter, economic efficiency...Ch. 4 - Prob. 4.4.5PACh. 4 - Prob. 4.4.6PACh. 4 - Prob. 4.4.7PACh. 4 - Prob. 4.4.8PACh. 4 - Prob. 4.4.9PACh. 4 - Prob. 4.4.10PACh. 4 - Prob. 4.2CTE
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- Consider the following demand and supply functions: Qª = 44 – 1p Q* = 10p Solve for and graph the demand and supply curves for this commodity. Label your graphs accordingly. How would you interpret the height of the demand and supply curves at Q= 10, respectively? Be specific. Solve for Q* and p* and graph your results. Solve for and label consumer and producer surplus at p*. How do the concepts of consumer and producer surplus relate to the definition of economic return discussed in class? At p = $6 what is Qª and Q*? Is the market experiencing a surplus, shortage, or equilibrium? Be sure to include a graph with your answer.arrow_forwardQuestion 8 You are the manager of medium-sized company that deals in production of make-ups in Ghana. Suppose one morning you heard on the news that the government has imposed a lump sum tax on every unit of make-up sold in the market. a) Using demand and supply analysis, illustrate the effect of the lump sum tax imposed on the make-up market by showing whether there will be a shortage or surplus of make-ups in the market. b) How would you expect the equilibrium price and quantity of make-up to change in the market? c) Suppose during the same period the price of a leading substitute product decreases along with the change the effect of the tax mentioned above, how would you expect the equilibrium price and quantity of make-up to change? Note: Draw a graph to explain your answers.arrow_forwardin a competitive market, if there should be a surplus of a product at a given price:arrow_forward
- The inverse supply function for gum is PS = 4 + QS. The inverse demand function for gum is PD = 16 - QD. By how much does producer surplus decrease when a $2 tax on production is implemented? (Please round your answer to 1 decimal place, e.g., 1.2, -3.4).arrow_forwardIf the supply and demand functions are given by p=20e0.4Q and p=100e-0.2Q, respectively, find the equilibrium price and quantity, and calculate the consumer’s and producer’s surplus.arrow_forwardA firm's inverse supply for a good is given by p = 4.00 + (4.00 × q). Assuming that there are enough buyers to meet the firm's supply, if the per-unit price increases from p = 18.00 to p = 23.50, what is the firm's change in producer's surplus? (Round to the nearest two decimals if necessary.) 2nd attempt A firm's inverse supply for a good is given by p = 4.00 + (4.00 × q). Assuming that there are enough buyers to meet the firm's supply, if the per-unit price increases from p = 18.00 to p = 23.50, what is the firm's change in producer's surplus? O 19.99 (Round to the nearest two decimals if necessary.) 1st attempt A firm's inverse supply for a good is given by p = 4.00 + (4.00 × q). Assuming that there are enough buyers to meet the firm's supply, if the per-unit price increases from p = 18.00 to p = 23.50, what is the firm's change in producer's surplus? O 15.47 (Round to the nearest two decimals if necessary.)arrow_forward
- The demand and supply functions for a particular commodity are D(x) = 80e-0.001x and S(x)= 30e0.001r , where x is the number of units of the product, D(x) is the price that results in a consumer demand of x units and S(x) is the price that results in a producer supply of x units. a. Find the equilibrium point using your calculator and identify the equilibrium units and price. Give your answers to the nearest whole unit and nearest dollar. The value of x at equilibrium is units. The value of p at equilibrium is b. Determine the consumers' surplus.arrow_forwardConsider the market for automobiles, and draw representative supply and demand curves.a) Suppose that the price of gasoline rises, and at the same time, the price of steel (an input to automobile production) falls. Show this on your graph. If you have no other information, what can you say about the change in equilibrium price and quantity?b) Now suppose that you have the additional information that the rise in gasoline prices has been relatively large, while the reduction in steel costs has been relatively small. How would this change your answer to (a)? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardImagine the market for a phone card has a demand function of QDX = 38 – 2PX and a supply function of QSX = 4PX - 10, where PX is the price of the phone card. If PX is 10, calculate the producer surplus (PS).arrow_forward
- the inverse demand function for mangos is p=6-0.5q, where q is the number of crates that are sold. The inverse supply function is p=q. In the past there was no tax on mangos but now a tax of 3$ per crate has been imposed on suppliers. What are the quantities produced before and after the tax was imposed? How much tax is raised?arrow_forwardSolve a Consumers' or Producers' Surplus Problem. A sports watch has a price-demand equation given by p= D(z) = 40-2-0174176a dollars, which gives the price per watch when a watches are demanded. The price-supply equation for the watch is given by p= S(x) = 0.6z+4 dollars, which gives the price per watch when z watches are supplied. If the equilibrium quantity is 11, find the consumers' surplus and the producers' surplus. The consumers' surplus is. (Your answer must begin with S.) The producers' surplus is Your answer must begin with $.)arrow_forwardConsider the inverse demand and supply for dates to be given by P= 3o-3Qd and P= 6+ Qs. The total surplus in this competitive market is where is due to producers. Select one: $50, 50% $54, 80% $18,75% $72, 25%arrow_forward
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