ECONOMICS-W/MYECONLAB
7th Edition
ISBN: 9780134833125
Author: Hubbard
Publisher: PEARSON
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Question
Chapter 4.A, Problem 4RQ
To determine
The use of deadweight loss for effect of price control.
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Explain why the imposition of the price ceiling does not result in a deadweight loss.
Beginning with the initial equilibrium, suppose the government sets the price of a pound of almonds at $14. On a graph, identify consumer surplus, producer surplus, and the deadweight loss.
Consider a market that is perfectly competitive and has no externalities. Which, if any, of these government interventions would lead to deadweight loss from preventing surplus generating transactions from occuring?
(a) A subsidy
(b) A tax
(c) A binding price floor
(d) A binding price ceiling.
Chapter 4 Solutions
ECONOMICS-W/MYECONLAB
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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- Discuss how the equilibrium price and quantity change when a change in demand occurs and the supply stays constant, and when a change in supply occurs and the demand stays constant. How do price controls affect the market? Provide a real-world example that takes consumer surplus and producer surplus into consideration.arrow_forwardSuppose the market for product X is described by the following equations. QD=600-2P and QS= -150+3P, where P is price in dollars and Q is the quantity in thousands. Calculate the equilibrium price and quantity in a free market. Now suppose that the government pays a subsidy of $20 per unit of product X. Calculate the buyer's price, the seller's price, and the equilibrium quantity Why does a tax create a deadweight loss? What determines the size of this lossarrow_forwardPlot the supply and demand functions on a sheet of graph paper. Suppose the government sets a price control for a pound of almonds at $14. On the graph, identify consumer surplus, producer surplus, and the deadweight loss.arrow_forward
- Consider a free market with demand equal to QQ = 900 − 10PP and supply equal to QQ = 20PP. Now the government imposes a $15 per unit subsidy on the production of the good. What is the consumersurplus now? The producer surplus? Why is there a deadweight loss associated with the subsidy, and whatis the size of this loss? Demonstrate in a graph.arrow_forwardConsider a free market with demand equal to QQ = 900 − 10PP and supply equal to QQ = 20PP. Now the government imposes a $15 per unit subsidy on the production of the good. What is the consumersurplus now? The producer surplus? Why is there a deadweight loss associated with the subsidy, and whatis the size of this loss?arrow_forwardIn a supply-demand diagram, a real estate market rent control regulation keeps the rent for 1 bedroom apartments below the market price. What consumer surplus is gained by consumers that is also producer surplus lost by producers? What consumer surplus is lost by consumers that is not gained by producers? What producer surplus is lost by producers that is not gained by consumers?arrow_forward
- The difference between a tax and a subsidy is when the government places a tax on the producers of a good, it _____ the equilibrium price and _____ the equilibrium quantity, but when the government grants a subsidy to the producers of the good, it _____ the equilibrium price and _____ the equilibrium quantity. Group of answer choices increases; increases; decreases; decreases decreases; decreases; increases; increases increases; decreases; decreases; increases decreases; increases; increases; decreases increases; does not change; does not change; increasesarrow_forwardWhat is consumer surplus? How is it illustrated on a demand and supply diagram? Give an example of consumer surplus. What is producer surplus? How is it illustrated on a demand and supply diagram? Give an example of producer surplus. What is deadweight loss? How is it illustrated on a demand and supply diagram? GIve an example of deadweight loss.arrow_forwardSuppose that weekly demand for loaves of bread (in thousands) is given by P = 10 – Q, and supply is given by P = 0.25Q. On a graph, show the market equilibrium price and quantity. Calculate producer and consumer surplus at the market equilibrium. Suppose that the government believes that the price is too high and decides to impose a price ceiling of $1. Demonstrate the new equilibrium quantity on your graph. Calculate the new producer and consumer surplus at the ceiling price.arrow_forward
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