Economics, Student Value Edition (7th Edition)
7th Edition
ISBN: 9780134739229
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 4, Problem 4.1.11PA
To determine
Consumer surplus and producer surplus .
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Students have asked these similar questions
Briefly explain whether you agree with the following statement: "If consumer surplus LOADING... in a market increases, producer surplus LOADING... must decrease."
A.
The statement is incorrect. Consumer surplus (and producer surplus) could increase if the government intervenes in a market by imposing
a price floor.
B.
The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing deadweight loss.
C.
The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing economic surplus.
D.
The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing economic efficiency.
E.
The statement is correct.
Draw a supply and demand graph and identify the areas of consumer surplus and producer surplus. Given the demand curve, what impact will an increase in supply have on the amount of consumer surplus shown in your diagram? Explain why.
Consider the market for mountain bikes .The following graph shows the demand and supply for mountain bikes before the government imposes any taxes
Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax , and consumer surplus , producer surplus , tax revenue and dead weight loss after tax .
Note : you can determine the areas of different portions of the graphs by selecting the relevant area
Consumer surplus before tax and after tax :
Producer surplus before and after tax :
Tax revenue after tax :
Deadweight loss after tax :
Chapter 4 Solutions
Economics, Student Value Edition (7th Edition)
Ch. 4.A - Prob. 1RQCh. 4.A - Prob. 2RQCh. 4.A - Prob. 3RQCh. 4.A - Prob. 4RQCh. 4.A - Prob. 5PACh. 4.A - Prob. 6PACh. 4.A - Prob. 7PACh. 4.A - Prob. 8PACh. 4.A - Prob. 9PACh. 4 - Prob. 1TC
Ch. 4 - Prob. 2TCCh. 4 - Prob. 4.1.1RQCh. 4 - Prob. 4.1.2RQCh. 4 - Prob. 4.1.3RQCh. 4 - Prob. 4.1.4RQCh. 4 - Prob. 4.1.5PACh. 4 - Prob. 4.1.6PACh. 4 - Prob. 4.1.7PACh. 4 - Prob. 4.1.8PACh. 4 - Prob. 4.1.9PACh. 4 - Prob. 4.1.10PACh. 4 - Prob. 4.1.11PACh. 4 - Prob. 4.1.12PACh. 4 - Prob. 4.1.13PACh. 4 - Prob. 4.1.14PACh. 4 - Prob. 4.2.1RQCh. 4 - What is economic efficiency? Why do economists...Ch. 4 - Prob. 4.2.3PACh. 4 - Prob. 4.2.4PACh. 4 - Prob. 4.2.5PACh. 4 - Prob. 4.2.6PACh. 4 - Prob. 4.2.7PACh. 4 - Prob. 4.2.8PACh. 4 - Prob. 4.2.9PACh. 4 - Prob. 4.2.10PACh. 4 - Prob. 4.3.1RQCh. 4 - Prob. 4.3.2RQCh. 4 - Prob. 4.3.3RQCh. 4 - Prob. 4.3.4RQCh. 4 - Prob. 4.3.5PACh. 4 - Prob. 4.3.6PACh. 4 - Prob. 4.3.7PACh. 4 - Prob. 4.3.8PACh. 4 - Prob. 4.3.9PACh. 4 - Prob. 4.3.10PACh. 4 - Prob. 4.3.11PACh. 4 - Prob. 4.3.12PACh. 4 - Prob. 4.3.13PACh. 4 - Prob. 4.3.14PACh. 4 - Prob. 4.3.15PACh. 4 - Prob. 4.3.16PACh. 4 - Prob. 4.3.17PACh. 4 - Prob. 4.3.18PACh. 4 - Prob. 4.3.19PACh. 4 - Prob. 4.4.1RQCh. 4 - Prob. 4.4.2RQCh. 4 - Prob. 4.4.3RQCh. 4 - Prob. 4.4.4RQCh. 4 - Prob. 4.4.5PACh. 4 - Prob. 4.4.6PACh. 4 - Prob. 4.4.7PACh. 4 - Prob. 4.4.8PACh. 4 - Prob. 4.4.9PACh. 4 - Prob. 4.4.10PACh. 4 - Prob. 4.2CTE
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Similar questions
- Suppose the government of a state imposes rent ceiling. Will it necessarily increase consumer surplus? Show with a graph.arrow_forwardRefer to the figure below. What is the consumer surplus generated at a price of $150 per game console? Instructions: Use the tool provided “CS” to illustrate this area on the graph. Consumer surplus: $ ____ What is the producer surplus generated at a price of $150 per game console? Instructions: Use the tool provided “PS” to illustrate this area on the graph. Producer surplus: $ ____ e. What is total economic surplus at a price of $150 per game console? Economic surplus: $ _____ f. What is the economic surplus generated if the market were in equilibrium? Instructions: Use the tool provided “ESeq” to illustrate this area on the graph. Economic surplus in equilibrium: $ ______arrow_forwardSuppose that the government imposes a tax on cigarettes, use the diagram below to answer the questions. D is the demand curve before tax, S is the supply curve before tax and ST is the supply curve after the tax. (a) Calculate the consumer surplus before the tax. (b) calculate the producer surplus before the tax.arrow_forward
- Question 1 The table below shows the marginal costs of the last croissant produced by four different bakeries. Assume that any bakery willing to sell croissants at the market price sells 100 croissants and that all bakeries have the same costs. How much producer surplus is earned in this market at a price of $3.00 Question 1 options: a) $100 b) $0 c) $1 d) $75 e) $200 Question 2 Use the graph below to answer the following question: What happens to consumer surplus if the price decreases from $8 to $5? Question 2 options: a) It increases by $18 b) It increases by $3 c) It increases by $21 d) It remains constant at $25 e) It…arrow_forwardUse the following definite integrals to solve for the consumer surplus, producer surplus and total surplus, giventhe following:Demand:P = -Q^2 +47Supply:P = 6Q +7arrow_forwardAssume the market depicted in the graph is in equilibrium. What is producer surplus? $30 $60 $50 $20arrow_forward
- Consider the market for mountain bikes. The following graph shows the demand and supply for mountain bikes before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of mountain bikes in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. (screen shot 1) Suppose the government imposes an excise tax on mountain bikes. The black line on the following graph shows the tax wedge created by a tax of $80 per bike. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area…arrow_forwardThink about all the goods and services that you consume. Which product gives you the highest consumer surplus? Discuss in detail using the equation of consumer surplusarrow_forwardusing the graph answer the following questions" 27. what is the size of consumer surplus when price floor of $9 is imposed 28. what is the size of producer surplus when price floor of $9 is imposed 29 what is the size of social surplus when price floor of $9 is imposedarrow_forward
- 5c In your own words, briefly explain the concept of deadweight loss as itrelates to the tax policyarrow_forwardAccording to Graph 8-1, after the tax is levied, producer surplus is represented by area:arrow_forwardUsing the following diagram (the equilibrium quantity is 5.5, the supply curve intersects the price axis at 3.5), answer these questions: a) If a tax of $2 were imposed, what price would buyers pay, and what price would suppliers receive? How much revenue would be raised by the tax? Compute the total consumer surplus, producer surplus, and welfare after the introduction of the tax. b) If a subsidy of $5 were imposed, what price would buyers pay, and what price would suppliers receive? How much would the subsidy cost the government? What would be the consumer surplus and the producer surplus? c) If the government imposed a binding price floor of $7 and compensated the producers by buying the excess surplus at the stated price: What would be the consumer surplus, the producer surplus, the government expenditures, and total welfare?arrow_forward
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