Consumer surplus is equal to the difference betweenthe maximum price a buyer is willing to pay and the market price.the minimum price a seller is wiling to accept and the market pricethe minimum price a buyer is willing to pay and the market pricethe maximum price a seller is willing to accept and the market priceConsumer surplus is shown graphically as the areaunder the demand curve and above the market price.above the supply curve and below the market price.above the supply curve and above the market priceunder the demand curve and below the market price.

Consumer Surplus: It refers to the difference between the maximum price the buyer is willing to pay…

Answered: Consumer surplus is equal to the…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter7: Market Efficiency And Welfare

Section: Chapter Questions

Problem 5P

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The car manufacturing market consists of100 identical factories, each with a marginalcost curve represented by MC =120 + 20where Q represents the amount of carsoffered.a) Derive the industry supply curve for cars.b) If the demand for cars is represented byP=250- 4Q, how many cars are bought atequilibrium?c) Calculate the aggregate consumer andproducer surplus at market equilibrium.
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use diagramsa. What is the effect on the equilibrium price and quantity traded in market of theintroduction of a new technology that reduces costs of production for all firms?b. What is the effect on the equilibrium price and quantity traded in a market of a changein tastes that reduces the demand for the product?c. What is the effect on the equilibrium price and quantity traded in a market of theimposition of a tax per unit sold on suppliers?d. What is the effect on the equilibrium price and quantity traded in a market of thepayment of a subsidy per unit sold paid to suppliers?
In the market for gold jewelry (unlike the marketfor gold ore), products come in a range of designs,styles, and levels of quality. Which of the characteristics of a competitive market is violated in thejewelry market? What does this imply for consumers’ willingness to buy from different producers?
(ALL OWNERSHIP GOES TO CENGAGE) The following graph plots a supply curve (orange line) for a group of recent graduates looking to sell used air fryers. Each seller has only a single used air fryer available for sale. Think of each rectangular area beneath the supply curve as the “cost,” or minimum price that each seller is willing to accept. Assume that anyone who has a cost that equals the market price is willing to sell their used air fryer. (image below) Region X (the purple shaded area) represents total producer surplus when the market price is equal to $____ , while Region Y (the grey shaded area) represent ___________ when the market price ________. (image below)
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You are planning a move across town. Doing your research you find that the average rate of a moving company is $250 per hour for two movers (moving truck included). The marginal benefit you receive from each hour of the two movers’ time (and truck) is listed in the accompanying table. Hours of movers’ time Marginal benefit 1 hour $850 2 hours $620 3 hours $500 4 hours $250 5 hours $150 6 hours $100 7 hours $0 For how many hours should you hire the movers? How much consumer surplus do you receive? Now suppose that instead of paying per hour, a moving company offers a flat rate of $1,500 for two movers plus a truck for an eight-hour day. Would you hire the movers? How has your consumer surplus changed?
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The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are:QD = 100 – 5P (1)QS = 5P. (2)P is the price in dollar and Q is the quantity in kilograms.a. Determine the market equilibrium price and quantity of widget-corn? Calculate the consumer surplus, producer surplus, and total economic surplus at the market equilibrium. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram.(i) What type of price regulation policy is this? Briefly explain. (ii) Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. (iii) Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. (iv) Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail. d.…
The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Supposethe supply and demand functions for widget-corn are:QD = 100 – 5P (1)QS = 5P. (2) P is the price in dollar and Q is the quantity in kilograms.a. Determine the market equilibrium price and quantity of widget-corn? b. Calculate the consumer surplus, producer surplus, and total economic surplus at the market equilibrium. c. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-cornsellers to charge $5 per kilogram.(i) What type of price regulation policy is this? Briefly explain. (ii) Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. (iii) Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. (iv) Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail.…

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