Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 5PA
The many identical residents of Whoville love drinking Zlurp. Each resident has the following
a. The cost of producing Zlurp is $150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each Whovillian consume? What is each person’s
b. Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)?
c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindy’s welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindy’s decision affect total surplus in Whoville?
d. MayorCrinch imposes a $1 tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person.
e. Based on your calculations, would you support the mayor’s policy? Why or why not?
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The many identical residents of Whoville love drinking Zlurp.each resident has the following willingness to pay for the tasty refreshment:
a.The cost of producing Zlurp is $150,and the competitive suppliers sell it at this price.The supply curve is horizontal .How many bottles will each whovillian consume?What is each person's consumer surplus?
b.Producing Zlurp creates pollution.each bottle has an external cost of $1.Taking this additional cost into account,what is total surplus per person in the allocation you described in part(a).
c.Cindy Lou Who,one of the residents of Whoville,decides on her own to reduce her consumption of Zlurp by one bottle.what happens to the Cindy's welfare (her consumer surplus minus the cost of pollution she experiences)?How does Cindy's decision affect total surplus in Whoville?
d.Mayor Crinch imposes a $1 tax on Zlurp.What is consumption per person now?Calculate consumer surplus,the external cost ,the government revenue,and total surplus per person.…
The restaurant industry develops an exciting new technology, a robot that quickly prepares food in half the usual time of chefs. This increases supply (producers save costs on labor) and demand (consumers find it fun to watch the robot make a meal) such that the price remains constant. However, the robot runs on coal and produces a lot of pollution, generating an external cost on production. How do consumer and producer surplus change as a result of this new technology?
Choice 1 of 4:Consumer surplus increases but the change in producer surplus is indeterminateChoice 2 of 4:Producer surplus increases but the change in consumer surplus is indeterminateChoice 3 of 4:Both producer and consumer surplus increaseChoice 4 of 4:Both producer and consumer surplus decrease
The many identical residents of Whoville love drinking zlurps. Each of the residents has the following willingness to pay for the tasty refreshment.
a. The cost of producing Zlurp is $150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each do Whovillian consume? What is each person's consumer surplus?
b.Producing Zlurp creates pollution. Each bottle has an external cost of $1.Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)?
c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindy's welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindy's decision affect the total surplus in Whoville?
d. MayorCrinch imposes a $1tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total…
Chapter 10 Solutions
Essentials of Economics (MindTap Course List)
Ch. 10.1 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.3 - Prob. 3QQCh. 10 - Prob. 1CQQCh. 10 - Prob. 2CQQCh. 10 - Prob. 3CQQCh. 10 - Prob. 4CQQCh. 10 - Prob. 5CQQCh. 10 - Prob. 6CQQCh. 10 - Prob. 1QR
Ch. 10 - Prob. 2QRCh. 10 - Prob. 3QRCh. 10 - Prob. 4QRCh. 10 - Prob. 5QRCh. 10 - Prob. 6QRCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Greater consumption of alcohol leads to more motor...Ch. 10 - Prob. 4PACh. 10 - The many identical residents of Whoville love...Ch. 10 - Prob. 6PACh. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - Prob. 9PA
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- When consumers pay less for something than it is worth to them, they receive a(n) ______. Question 1 options: a) external benefit b) deadweight loss c) producer surplus d) consumer surplus Question 2 At the equilibrium quantity, _________________. (choose all that apply) marginal benefit equals marginal cost the sum of consumer surplus equals the sum of producer surplus the quantity demanded equals the quantity supplied The minimum price that producers must receive to induce them to produce another unit of a good or service is equal to the good's ______. Question 3 options: a) marginal cost b) marginal benefit c) producer surplus The gains from trade for consumers are measured by ______. Question 4 options: a) external benefits…arrow_forwardThe price of good X is $7. But each unit of good X produces has an external cost of $1. What is the social cost of one unit of good X?arrow_forwardDue to a firm generating external costs (a negative externality), the government decides to ________ the firm. In response, the firm will produce ________ units of output in order to continue maximizing profits and reach the new producer equilibrium. Question 4Answer a. tax; fewer b. subsidize; more c. tax; more d. subsidize; fewerarrow_forward
- Which of the following does the producer receive if the market price exceeds the cost of production? Question 2 options: a) Producer surplus b) Deadweight loss c) External benefitarrow_forwardUse the graph attached below as a starting point (either download it or print it out). Add curves, labels, etc. to this graph in order to show the following: 1. Show that this good has a $4/unit negative externality (external cost), such as pollution. 2. Shade the area that represents the Deadweight Loss (lost gains from trade) caused by the external cost. 3. Show a tax or subsidy wedge (whichever you think is appropriate) that will solve the problem of the external cost. 4. Show the socially optimal level of production that the Pigouvian tax or subsidy above will help the market to achieve. You may use software or pencil and paper to complete this graph. Upload it here when you are done.arrow_forward
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