D B Price ceiling D Q Q2 Q1 The figure above shows a market for gasoline with a price ceiling equal to $3.50. With the price ceiling in place, what area in this figure is equal to the redistribution from producers to consumers? OD O A O B Ss C.
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- Although 23 states barred the sale of self-service gasoline in 1968, most removed the bans by themid 1970s. By 1992, self-service outlets sold nearly 80% of all US gas, and only New Jersey andOregon continued to ban self-service sales. Using predicted values for self-service sales for NewJersey and Oregon, Johnson and Romeo (2000) estimated that the ban in those two states raisedthe price of gasoline by somewhere between 3¢ and 5¢ per gallon. Why did the ban affect theprice? Illustrate using a figure and explain. Show the welfare effects in your figure.Q4. Assume the market of non-medical masks can be described by the following equations: Demand: QD= 20 - P Supply: QS=2P-10 Where the quantity QP and QS are in millions, and price P is in dollars. Suppose all the masks are imported, and government decided to set a quota at 5 million units. a) Compute the pre-quota equilibrium price and quantity and illustrate your answers graphically. b) In your graph of a) Clearly show the con umer surplus (CS) and producer surplus (PS) before and after the quota. c) Show the dead weight loss (DWL) in the graph and calculate it.The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf. q5-Why would this tax be both socially inefficient and inegalitarian? Use the concepts of deadweight loss and wealth inequality.
- Your grandmother likes old-fashioned yard salesand doesn’t understand why everyone is so excitedabout eBay. Explain to her why the creation of amarket that enables people who don’t live in thesame town to buy and sell used goods increasestotal surplus over the yard-sale market.The market demand for bicycle helmets is given by D(P) = 90−4P and the market supply ischaracterized by S(P) =P−10. In both expressions, P is the price per unit. The government introduces a per unit subsidy of S per helmet, that is paid out to the producer for each sale of helmets. (a) What is the equilibrium price and quantity before the government intervenes in the market? (b) What is the equilibrium price and quantity after the government intervenes in the marketimposing a per subsidy S >0? Hint: You have to find the equilibrium for all relevant levels of S. (c) Calculate changes in consumer surplus, producer surplus and welfare, as a function of subsidy S, due to the introduction of the subsidy. What welfare conclusion(s) do you draw? Illustrate graphically.In an effort to reduce alcohol consumption, the government is considering a tax$1 for every gallon of liquor sold (tax imposed on manufacturers). Supposethe demand curve is Q D = 500,000 - 20,000 P (where Q D is the number of gallons of drinkliquor demanded and P is the price per gallon), and the liquor supply curve isQ S = 30,000 P (where Q S is the number of gallons supplied).a. Calculate how the tax affects the price paid by consumers and the price paidaccepted by the manufacturer.b. What is the tax revenue for the government? How much incomecome from consumers, and how much from producers?c. Suppose the demand for liquor is more elastic for younger drinkers thanolder drinker. Will the liquor tax be more, less, or the sameeffective in reducing alcohol consumption among young drinkers?Explain.
- Suppose the government is considering an increase in the toll on a certain stretch of highway from $.20 to $.40. At present, 80,000 cars per week use that highway stretch; after the toll is imposed, it is projected that only 75,000 cars per week will use the highway stretch. Assuming that the marginal cost of highway use is constant (i.e., the supply schedule is horizontal) and equal to $.20 per car, what is the change in social surplus attributable to the increase in the toll? (Hint: The toll increase will cause the supply schedule, not the demand schedule, to shift.) Calculate government revenues from the increased toll. A. $18,750 B. $37,500 C. $15,000 D. $1000Based on Table 1, in order to help the consumer, the government imposes a price control of RM0.60 per liter: Give the name of this price control and how much petrol will be demanded by consumer at this price?. How much petrol will be offered for sale by suppliers, and how much petrol will actually be sold? Calculate the excess quantity of petrol demanded. Price (RM) Quantity demanded (liter per day) Quantity supplied (liter per day) 0.80 8 24 0.75 10 22 0.70 12 20 0.65 14 18 0.60 16 16 0.55 18 14QUESTION ONESuppose that a market for tomatoes is given by the following demand and supply equationsQd = 40 − 2PQs = −4 + 2PWhere Qs, Qd and P, are the quantity demanded, quantity supplied and Price for tomatoes respectively.i. Determine the equilibrium price and quantity of tomatoes.ii. On the same diagram, draw the demand and supply curve, clearly showing the intercepts, equilibrium price and equilibrium quantity.iii. Calculate the consumer surplus, producer surplus and total surplus.iv. Suppose that the government introduces a fixed tax of ZMW5 per unit of tomato.a) Calculate the new equilibrium price and quantity. b) Find the new consumer surplus, producer surplus, total surplus, and the deadweight loss?c) What is the incidence of a tax?
- P 2 3 4 5 6 7 8 9 10 11 12 Qs 100 200 300 400 500 600 700 800 900 1000 1100 QD 550 500 450 400 350 300 250 200 150 100 50 Now imagine that there is a price ceiling on coconuts at $3 but in order to prevent wasting peoples' time by making them wait in line, the government hands out ration coupons to people. In order to buy a coconut you need a coupon. Assume that the number of coupons is the appropriate number to clear the market with the price ceiling (you should know what that is). Now notice that the government probably doesn't know who has the highest marginal value for coconuts so, while this will eliminate the waste from the line it will most likely not allocate the coconuts efficiently. However, we can solve…Table 1Buyer Willingness To PayLori $50.00Audrey $30.00Zach $20.00Calvin $10.002. Refer to Table 1. If the price of the product is $15, then who would be willing to purchase theproduct?a. Lorib. Lori and Audreyc. Lori, Audrey, and Zachd. Lori, Audrey, Zach, and Calvin3. Refer to Table 1. If price of the product is $30, then the total consumer surplus isa. $-10.b. $-6.c. $20.d. $30.Explain why voluntary Martians improve social welfare.
