Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 2, Problem 8MC
To determine
The outcome of the transaction.
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Q 1::: Melissa buys an iPod for $120 and gets consumer surplus of $80.
a. What is her willingness to pay?
b. If she had bought the iPod on sale for $90, what would her consumer surplus have been?
c. If the price of an iPod were $250, what would her consumer surplus have been?
Q 2::: It is a hot day, and Bert is thirsty. Here is the value he places on a bottle of water:
Value of first bottle $7
Value of second bottle 5
Value of third bottle 3
Value of fourth bottle 1
a. From this information, derive Bert’s demand schedule. Graph his demand curve for bottled water.
b. If the price of a bottle of water is $4, how many bottles does Bert buy? How much consumer surplus does Bert get from his purchases? Show Bert’s consumer surplus in your graph.
c. If the price falls to $2, how does quantity demanded change? How does Bert’s consumer surplus change? Show these changes in your graph.
Q 3::: Ernie owns a water pump. Because pumping large amounts of water is harder than pumping small…
Pls answr the highlighted blank. And the choices for numbered blanks are
Choices: 1. The change in total producer surplus, the total producer surplus
2. Is $140, is $100, changes from $160 to $140, changes from $100 to $140
In a market, what determines the value of the total surplus?
Question 22Answer
a.
the total value to buyers less the total costs to sellers
b.
consumers' willingness to pay plus producer costs
c.
producer surplus plus consumer surplus
d.
the total costs to sellers less the total value to buyers
Chapter 2 Solutions
Managerial Economics: A Problem Solving Approach
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- Give typing answer with explanation and conclusion Education leads to public benefits above and beyond those enjoyed by individuals deciding on whether or not to enroll in college. The government is weighing an education policy intervention. In this context, which of these statements is true? a. Leave this market alone; it is efficient and welfare is already maximized. b. A Pigouvian tax on tuition will improve efficiency in this market by aligning private costs and social costs. c. Giving a tax break to families with children enrolled in college will improve market efficiency. d. College is already too expensive. Setting a binding price ceiling on tuition will improve market efficiencyarrow_forwardq21- If Amy is willing to pay $800 for a new dress but is able to buy the dress for $600, her consumer surplus is: Select one: a. $600 b. $200 c. $800 d. $1400arrow_forwardPrice =120-Q^2 Total cost = 30Q Find: 1- consumer surplus 2- profit 3- total social welfare 4- deadweight lossarrow_forward
- Multiple Choice Q2 Andy gives piano lessons. He has an opportunity cost of $50 per lesson and charges $60. He has two students: Bob, who has a willingness to pay of $70, and Carl, who has a willingness to pay of $90. When the government puts a $20 tax on piano lessons and Andy raises his price to $80, the deadweight loss is O $10, $20 O $10, $40 O $20, $20 O $20, $40 and the tax revenue isarrow_forwardSuppose that we have 3 consumers. The government considers building a road. It costs $80. The consumers value it at: $20, $40, and $50. Should the government build the road? Question 6 options: No, consumer surplus is smaller than the cost of building. Consumer surplus is larger than the cost so it is profitable to build the road, but before deciding to build we should check we cannot build something with even higher value to consumers which costs the $80 or less (so we properly consider opportunity costs as well as consumer surplus) Yes, consumer surplus is larger than the cost. No, governments should not build roads, cities should do that.arrow_forward1. Hugo decides to buy his Christmas gifts on Black Friday. To simplify his life, he is giving his 10 closest friends scarves for Christmas and everyone else Christmas cards. Hugo is willing to spend $200 on the 10 scarves. When he arrives at Macy’s at 5:00 A.M. on Black Friday, he discovers that scarves are on sale for $12 each. Hugo buys 10 scarves and uses the remaining $80 to buy himself a some clothes. 1.a. How much consumer surplus did Hugo receive from the tenth scarf he purchased? 2. Now suppose the manager at Macy’s was hoping to sell all 100 scarves Macy's had in inventory. She decided to put the scarves on sale for $10, but an employee accidentally listed the sales price at $12. To the manager’s surprise, the store sold all 100 scarves at the $12 sales price. 2.a How much producer surplus did Macy’s receive from the hundredth scarf sold?arrow_forward
- 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?arrow_forward13 sellers and 13 buyers are each willing to buy or sell one unit of a good, with values {$13, $12, $11, $10, $9, $8, $7, $6, $5, $4, $3, $2, $1}. If the market is competitive but the cost of market-making is $4 per transaction, the equilibrium quantity traded in the market is a. 4 b. 7 c. 9 d. 5.arrow_forwardPlease no written by hand and no emage Identify whether each of the following statements best illustrates the concept of consumer surplus, producer surplus, or neither. Statement Consumer Surplus Producer Surplus Neither I sold a swimsuit for $56, even though I was willing to accept as little as $50 in exchange for it. Even though I was willing to pay as much as $165 for a polaroid camera, I bought a polaroid camera for just $156. A pop up shop had a flash sale on records, so I bought a used record for my cousin.arrow_forward
- Campbell needs to be paid at least $500 in order to sell their bicycle. They sell their bicycle and realize $125 in producer surplus. How much money was paid to Campbell for their bicycle?arrow_forwardSefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service. The value of the service to each of them is $50 and it costs $80 to hire a housecleaner. Should they hire a housecleaner? A. Yes, if each contributes $50, then each stands to gain a consumer surplus. B. No, because each will wait for the other to hire the housecleaner. C. Yes, but only if a housecleaner will accept $50 so that each can take turns to pay the housecleaner. D. No, because it will be difficult for them to agree on which housecleaning service to use.arrow_forwardSuppose there are three identical blenders available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many blenders will be sold and what is the value of consumer surplus in this market? * a. One blender will be sold and consumer surplus is $30. b. One blender will be sold and consumer surplus is $5. c. One blender will be sold and producer surplus is $5. d. Three blenders will be sold and consumer surplus is $0. e. None of these.arrow_forward
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