MICROECONOMICS(LL)COMPANION
21st Edition
ISBN: 9781260713541
Author: McConnell
Publisher: MCG
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Question
Chapter 4, Problem 5DQ
To determine
The impact of subsidy and tax spill over effect.
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Price per bin
120
110
100
90
80
70
60
50
40
30
20
10
O $0
D2
10 20 30 40 50 60 70 80 90 100
Bins of peaches
Suppose the figure represents the market for peaches and there are no externalities in the market. Suppose a sales tax of $40 per bin of peaches is levied on
consumers of peaches. The new demand curve is labeled D2. Consumer surplus after the tax is:
O $1000
D1
$300
O $100
O
O
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O
10
Suppose that the market is initially at an equilibrium price of $6 and an
equilibrium quantity of 40 units in the graph above. If the government
decides to add a $2 per-unit tax on this good, the deadweight loss from
the tax will be:
10
80
70
S1
O 60
SO
Demand
0 10 20 30 40 50 60 70 80 90100
Refer to the above supply and demand graph of Product X.
Q,
Quantity of Product X
What would happen if the government taxed the producers of this product because
it has negative externalities in production?
O 1) Supply would increase.
2) Demand would decrease.
O 3) Price would decrease.
4) Supply would decrease.
Price
Chapter 4 Solutions
MICROECONOMICS(LL)COMPANION
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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- 20 18 S 16 14 12 10 8 Page 1 D 6. 4 2 0 1 2 3 4 5 6 7 8 9. 10 11 12 Quantity Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. Which curve shifts as a result? O Demand curve is shifting up by $6. Supply curve is shifting down by $6. Supply curve is shifting up by $6. Demand curve is shifting down by $6. Pricearrow_forwardEconomic efficiency is O A. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. O B. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. O C. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum. O D. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.arrow_forwardThe accompanying diagram shows the supply and demand diagrams for the competitive market for honey in one region. MC represents private marginal cost and MB represents private marginal benefit. Assume there are two types of firms in this region-beekeepers that produce honey and orchard keepers that produce peaches. The bees provide a benefit to the orchard keepers by pollinating their peach trees. If the external marginal benefit is $2 per unit of honey, then what is the allocatively efficient output? O A. 20 kg B. 80 kg C. 40 kg D. 100 kg E. 60 kg C Price ($ per kg) 12 11 10 8 20 MC2 MB 40 :60 :80 S=MCO MC₁ MB₂ D=MBO 100 Quantity (kg of honey per month)arrow_forward
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