Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 4, Problem 17P
To determine
(a)
Change in consumer surplus
To determine
(b)
Impact on cable television companies that show on-
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Question:
Given, P = 200 - 3Q
P = 50 + 2Q
What is the market equilibrium P and Q?
If the price goes up by $10, how will the customers react? (Hint: Find PED and comment. First find new P* and Q*)
If the government regulates the market by imposing 10% sales tax, what will be the change in producer surplus?
Imagine there is no tax, and the market is competitive. What will be the profit maximization output level?
The demand curve for cookies is downward-sloping.
When the price of cookies is $2, the quantity
demanded is 100. If the price rises to $3,
what happens to consumer surplus?
a. It falls by less than $100.
b. It falls by more than $100.
c. It rises by less than $100.
d. It rises by more than $100.
Don't use pen or paper
Suppose market demand and supply are characterized by the following equations:
p =
12
-
0.4
Qd
p =
2
+
0.4
Qs
When the market clears, what is the economic surplus? (Round your answer to one decimal place.)
Chapter 4 Solutions
Essentials of Economics
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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 persons 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 Cindys welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindys 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 mayors policy? Why or why not?arrow_forwardLet us take a car market where we know(but the buyers don`t) that 40 percent of the cars are bad cars(lemons), the reservation price for demanders is 12 (thousand) for good cars and 10 (thousand) for bad cars, while the reservation price for the car suppliers is 10 thousand for a good car, and 8 thousand if it is a bad car. a-Discuss what the situation would be like if everybody could observe if a car is a good car, or a bad car(lemon)- how would the market reach equilibrium? b-Discuss what the situation would be like if only sellers knew the true character of the car( good or bad) whereas the buyers only know the average car quality? c-Why would the second situation create a partial unraveling of the market? What are the only cars that can be bought and sold? d-Prove why the in question 3b equilibrium is a suboptimal outcome? e-Why does a similar situation in the labor market result in a signaling equilibrium? Sketch your way of thinking, and show in which case there would be a…arrow_forwardSuppose that Nabisco is willing to sell its first packet of Oreos for $1, the second for $2, the third for $3, and the fourth for $4. If the price of Oreos is $2.50, what is the producer surplus? (Assume that Nabisco CANNOT sell partial packs of Oreos.)arrow_forward
- a: Illustrate an example of your choice and discuss consumer surplus, producer surplus, Total surplus, and deadweight loss with the help of the graphs. b: Calculate the consumer surplus, producer surplus, and total surplus in a market of airplane tickets if the Equilibrium price per ticket is SAR 160, the equilibrium Quantity is 80 tickets, the upper intercept of the demand curve on the y-axis is SAR 400 and lower intercept of the supply curve on the y-axis is zero. What will be the dead weight loss if the government imposes a tax of SAR 80 per ticket and the buyer and sellers share the tax of 50 percent each? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism Answer completely. Itreid with chatgpt and calculation was wrong and got zero,so please answer accuracy is top priorities You will get up vote for sure if answer is perfect .arrow_forwardCarrie is willing to pay $1400 for the new Samsung Galaxy phone. Samsung is selling the new Galaxy phone for $1200. It costs Samsung $600 to produce this phone. The total economic surplus if Carrie purchases this phone is $________. Im not sure which one is right one individual said onsumer surplus = 1/2(willing to pay - selling price ) *quantity CS = 1/2 ( 1400 - 1200) *1 CS = 100 Producer surplus = 1/2( selling price - willing to receive)*quantity PS = 1/2 ( 1200-600)*1 PS =300 total economic surplus = PS +CS = 400 and another said According to the given information, total economic surplus would be: =12×Maximum willingness to pay-Minimum Willingness to accept×quantity sold=12×$1400-$600×1=$400=$800arrow_forwardI need help with this homework What is the value of Producer Surplus in this market? What is the deadweight loss that results from this market? What is the value of the Lerner Index?arrow_forward
- Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is perfectly competitive.a. On the back of the page, graph the supply and demand curves.b. Solve for the equilibrium price and quantity of tents. Show this point on your graph from part (a). c. How much consumer surplus is created in this market? How much producer surplus? d. Suppose the Council puts a tax of $5 per unit on the purchase of pickles. Write an equation showing the relationship between the price paid by consumers and the price received by producers. e. Find the new (after-tax) equilibrium quantity of pickles, price paid by consumers, and price received by producers. f. How much consumer surplus is created by this market after the tax? How much producer surplus?g. How much tax revenue is generated by this tax? How much deadweight loss does the tax cause?arrow_forwardIt says the option four is correct. Can you explain how? If you can graph it so that I can see it that would be awesome. To me, it seems like the gain in consumer surplus would be larger than the loss of producer surplus. But the correct option, option D says that’s not right.arrow_forwardThe following Table refers to four buyers’ willingness to pay for papadums. Each buyer is willing to buy at most one papadum and no more. Buyer Willingness to Pay Linc $17.00 Jeff $15.00 Frankie $9.00 Wash $3.00 a. Let the competitive market price be $4.00: calculate the total consumer surplus in the market at this price. b. Assume now that there is only a single seller of papadums, and she knows each buyer’s willingness to pay. Assume that this seller incurs a cost of $4.00 per unit of papadum produced (i.e., the marginal cost is constant). If she intends to maximise profits, how many papadums would this seller supply to the market, and what price would she charge? Remember, the price has to be the same for each unit sold. Hint: start at a price of $17 and calculate what profit would be. Then lower the price just enough to attract an additional buyer and calculate what the new profit would be. Repeat this until all four buyers are purchasing the…arrow_forward
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