MICROECONOMICS(LL)
21st Edition
ISBN: 9781260279085
Author: McConnell
Publisher: MCG
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Chapter 22, Problem 8DQ
To determine
The economic effect of price support.
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Suppose demand and supply are given by: (LO3, LO4)
Qx d = 14 − 1/2 Px and Qx s = 1/4Px − 1
a. Determine the equilibrium price and quantity. Show the equilibrium graphically.
B. Supposed a $ 12 excise tax is imposed on the good. Determine the new equilibrium price and quantity
C. How much tax revenue does the government earn with the $12 tax
Suppose demand and supply are given by: (LO3, LO4)Qx d = 14 − 1/2Px and Qx s = 1/4Px − 1c. How much tax revenue does the government earn with the $12 tax when the new equilibrium quantity is 2 units after tax .
(Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2008
(A) 7.6
(B) 12.4
(C) 17.2
(D) 2.9
Chapter 22 Solutions
MICROECONOMICS(LL)
Ch. 22 - Prob. 1DQCh. 22 - Prob. 2DQCh. 22 - Prob. 3DQCh. 22 - Prob. 4DQCh. 22 - Prob. 5DQCh. 22 - Prob. 6DQCh. 22 - Prob. 7DQCh. 22 - Prob. 8DQCh. 22 - Prob. 9DQCh. 22 - Prob. 10DQ
Ch. 22 - Prob. 11DQCh. 22 - Prob. 12DQCh. 22 - Prob. 13DQCh. 22 - Prob. 14DQCh. 22 - Prob. 1RQCh. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - Prob. 5RQCh. 22 - Suppose that corn currently costs 4 per bushel and...Ch. 22 - Suppose chat both wheat and corn have an income...Ch. 22 - Prob. 3PCh. 22 - Prob. 4P
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- 1 Given the following bids to buy and to sell a used book. Bids to buy: $16. $16 . $18 . $18 . $18 . $20 . $22 $22 . $23 . $24 Bids to sell $18 . $18 . $18 . $22 . $23 . $23 . $23 . $23 . $24 $24 Which argument makes the most sense and why? A) set price equal to $22 to maximize sales B) set price at $16, so that more people will buy the product C) set price at $24 so that more people will sell the product D) set price at $18 because three people will buy and 3 people will sell And describe a real life example for what happens to quantity demanded of your product if A) the price of a complement rises B) the price of a substitute risesarrow_forwardIf the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardSuppose that the price elasticity for hip replacement surgeries is 0.2. Further suppose that hip replacement surgeries are originally not covered by health insurance and that at a price of $50,000 each, 10,000 such surgeries are demanded each year. LO24.2 a. Suppose that health insurance begins to cover hip replacement surgeries and that everyone interested in getting a hip replacement has health insurance. If insurance covers 50 percent of the cost of the surgery, by what percentage would you expect the quantity demanded of hip replacements to increase? What if insurance covered 90 percent of the price? If insurance covers 50 percent of the bill, just assume that the price paid by consumers falls 50 percent.) b. Suppose that with insurance companies covering 90 percent of the price, the increase in demand leads to a jump in the price per hip surgery from $50,000 to $100,000. How much will each insured patient now pay for a hip replacement surgery? Compared to the original situation,…arrow_forward
- Suppose demand and supply are given by: Q^d=14-0.5P and Q^s=0.25P-1. Determine the equilibrium quantity and price in this market. Show the equilibrium graphically. Suppose a $12 excise tax is imposed on the good.Determine new supply and the new equilibrium quantity and price. How much does producers' revenue change? How much tax revenue does the government earn?arrow_forwardConsider that the market demand for a textbook is given by P = 100 - 20 land the market supply is given by P = 10 + Q. Suppose a price ceiling of $20 is imposed. What is the deadweight loss? O 300 O 450 O 600 O 150arrow_forwardAssume the following values for attached figures: Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags. The market equilibrium price is $45 per bag. The price at a is $85 per bag. The price at c is $5 per bag. The price at f is $59 per bag. The price at g is $31 per bag. Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions. LO4.2 a. What is the dollar value of the total surplus (producer surplus plus consumer surplus) when the allocatively efficient output level is being produced? How large is the dollar value of the consumer surplus at that output level? b. What is the dollar value of the deadweight loss when output level Q2 is being produced? What is the total surplus when output level Q2 is being produced? c. What is the dollar value of the deadweight loss when output level Q3 is produced? What is the dollar value of the total surplus when output level Q3 is produced?arrow_forward
- Consider the market for product ABC, when the price is at Php 12, quantity demanded is 6 units and quantity supplied is 3 units. An eight pesos increase in the price would change quantity demanded by 2 units and quantity supplied by 4 units. 1. If the government imposed Php 0.75 tax, how much would be the tax burden of the seller?2. At equilibrium point, how much is the consumers surplus? how much is the total surplus 3. What is the elasticity of supply for the product at equilibrium point? how about the elasticity of demand at equilibrium point?arrow_forward6. Assume that a country is endowed with 2 units of oil reserve. There is no oil substitute available. How long the oil reserve will last if (a) the marginal willingness to pay for oil in each period is given by P = 11 - 0.71q, (b) the marginal cost of extraction of oil is constant at $4 per unit, and (c) discount rate is 2%?arrow_forwardDomestic Demand Function: p= 80-4Q Domestic Supply Function: p= 20+2.5Q There is an international trade price equal to $15 (pw=15). Although, TheGovernment institutes an import tariff of $9 per unit. Suppose that instead of an import tariff, the government wanted to put an import quota that would make the same change in Producer Surplus as the $9 tarrif A) What is the size of this import Quota that makes this same change in Producer Surplus as the $9 Tariff? B) What is the Deadweight Loss under this Import Quota?arrow_forward
- Suppose a two-person household. Person 1 has h1 units of time available and takes l1 units of leisure time, and person 2 has h2 units of time available and takes l2 units of leisure time. Collectively, the two persons in the household care about their total consumption c, and their total leisure l=l1+l2, and they have preferences over their total consumption and total leisure just as specified in the course. But person 1 faces a market wage w1, and person 2 faces a market wage w2, with w1 > w2. 1) Draw the budget constraint faced by the two-person household. What will the household do, that is, how much does each household member work? 2) What happens if w2 rises? (w1 > w2 still holds) 3) Explain your results and interpretarrow_forwardConsider the following examples. For each one,say whether the incentive is positive or negative.[LO 1.3]a. Bosses who offer time-and-a-half for workingon national holidays.b. Mandatory minimum sentencing for drugoffenses.c. Fines for littering.d. Parents who offer their children extra allowance money for good grades.arrow_forwardGiven- Qd=1000−25pQs=−200+5p A)What is the equilibrium price and quantity B)Graph these functions. Show where equilibrium price and quantity are. Show x and y intercepts C)What is the new equilibrium price if there is 5 peso tax per unit? D)What is the new equilibrium if there is a 3 peso subsidy per unit? (no tax applied here) E)Explain the welfare effects of taxes and subsidies based on equilibrium quantities and prices.arrow_forward
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