Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 4, Problem 4P
To determine
(a)
To determine
(b)
Maximum license fee
To determine
(c)
Producer Surplus
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The accompanying diagram illustrates a taxi driver’s individual supply curve (assume that each taxi ride is the same distance). a. Suppose the city sets the price of taxi rides at $4 per ride, and at $4 the taxi driver is able to sell as many taxi rides as he desires. What is this taxi driver’s producer surplus? (Recall that the area of a right triangle is ½ × the height of the triangle × the base of the triangle.) b. Suppose that the city keeps the price of a taxi ride set at $4, but it decides to charge taxi drivers a “licensing fee.” What is the maximum licensing fee the city could extract from this taxi driver? c. Suppose that the city allowed the price of taxi rides to increase to $8 per ride. Again assume that, at this price, the taxi driver sells as many rides as he is willing to offer. How much producer surplus does an individual taxi driver now get? What is the maximum licensing fee the city could charge this taxi driver?
Suppose the demand for Pan de Sal rises. What happens to producer surplus in the market for Pan de Sal? What happens to producer surplus in the market for flour? Illustrate your answer with diagrams.
Answer the following questions based on the graph that represents Kyle's demand for ribs per week at Big Ed's Barbecue.
f.
If the price of ribs rose to $10, what would happen to Big Ed's producer surplus?
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What is the total surplus in this market at a price of $10?
h.
If the price of ribs fell to $5, what would be Kyle's consumer surplus?
j.
What is the total surplus in this market at a price of $5?
Chapter 4 Solutions
Essentials of Economics
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Similar questions
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