Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 7, Problem 5P
To determine
The connection between total surplus and efficient level of output with the help of
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STUDY NOTES
The value of x at equilibrium is.
The value of p at equilibrium is $
Find the consumers' surplus and the producers' surplus at the equlibrium level for the given
price-demand and price-supply equations. Include a graph that identifies the consumers'
surplus and the producers' surplus. Round all values to the nearest integer.
p=D(x)=39-0.09x; p= S(x)=11+0.05x
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The consumers' surplus at equilibrium is $.
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The producers' surplus at equilibrium is $.
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Determine the output level creates a maximum total surplus.
The market demand function for corn is
Qd = 19 - 5P
The market supply function is
QS = 5P - 4
both quantities measured in billions of bushels per year.
Instructions: Round all quantities to the nearest whole number and prices to 2 decimal places.
a. What is consumer surplus at the competitive market equilibrium?
b. What is producer surplus at the competitive market equilibrium?
c. What is aggregate surplus at this equilibrium?
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- Please written by computer source Suppose that the demand curve for a product is given by Q = 100 −10p and the supply curve is Q = 10p. Assume that income effects (elasticities) are small so consumer surplus is a good measure of consumer welfare. (a) What is the equilibrium price and quantity with no distortions? (b) The government imposes a tax of $2.00 per unit sold. What is the new equilibrium quantity? Sketch the market equilibrium in a graph. (c) Given the tax what is the change in consumer surplus? What is the change in producer surplus? What is the change in government revenue? What is the net Dead Weight Loss from the tax? (d) Say the government proposes to use the revenue from the tax to pay for snacks in our last ECON 312A lecture. The total social benefits from the snacks would be $82.00. Will the tax increase overall welfare if the revenue is used to buy the snacks? What is the dollar value of the net gain or loss to society?arrow_forwardThe market demand and supply equations for theme park in a city are given by P = 30 – 0.005QD and P = 10 + 0.005QS, where P is the price in dollars and QD is the quantity of theme-park tickets demanded and QS is the quantity of theme park ticket supplied. Given that the equilibrium price of theme park tickets is $20, equilibrium quantity of theme park tickets is 2000 and the consumer surplus is 10000 and producer surplus is 10000: Explain the implications of the welfare of consumers, producers and the society when the price of theme park ticket is fixed at $15. Support your answers with a graph of the theme park tickets market.arrow_forwardwhich statement is correct Moving production from a high-cost producer to a low-cost producer will decrease total surplus. Suppose the United States changed its laws to allow for the legal sale of a kidney and the government allowed a free market in organs for transplant then there would be a decrease in the price of a kidney and an increase in the shortage of kidneys for transplant. Total surplus in the market is the summation of consumer surplus and producer surplus and it is maximized at the market equilibrium in the absence of market power and externalities. If a good is not being produced by sellers with the lowest cost, then the market reflects inefficiency in the allocation of resources. Welfare economics deals with how the allocation of resources affects economic well-being. The willingness to pay is a measure of how much the buyer values the good. The marginal seller is the seller who would leave the market first if the price were any higher.arrow_forward
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