MICROECON.S W/CONNECT ACCCESS>CUSTOM<
21st Edition
ISBN: 9781260281200
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 5, Problem 3DQ
To determine
The difference between the rent seeking and the profit maximization.
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Suppose demand and supply are given by: (LO3, LO4)
Qx d = 14 − 1/2 Px and Qx s = 1/4Px − 1
a. Determine the equilibrium price and quantity. Show the equilibrium graphically.
B. Supposed a $ 12 excise tax is imposed on the good. Determine the new equilibrium price and quantity
C. How much tax revenue does the government earn with the $12 tax
(Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2008
(A) 7.6
(B) 12.4
(C) 17.2
(D) 2.9
Approximately how many people are employed in the federal bureaucracy? O 1 million-1.4 million O 1.5 million -1.7 million O2 million-2.4 million O 2.5 million - 3 million
Chapter 5 Solutions
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- The price of a gallon of gasoline in California was $0.99 in 1997, and it is currently $3.69. By what factor have the prices increased? -3.73 O 72 O 27 3.73arrow_forwardSuppose a two-person household. Person 1 has h1 units of time available and takes l1 units of leisure time, and person 2 has h2 units of time available and takes l2 units of leisure time. Collectively, the two persons in the household care about their total consumption c, and their total leisure l=l1+l2, and they have preferences over their total consumption and total leisure just as specified in the course. But person 1 faces a market wage w1, and person 2 faces a market wage w2, with w1 > w2. 1) Draw the budget constraint faced by the two-person household. What will the household do, that is, how much does each household member work? 2) What happens if w2 rises? (w1 > w2 still holds) 3) Explain your results and interpretarrow_forwardSuppose that the price elasticity for hip replacement surgeries is 0.2. Further suppose that hip replacement surgeries are originally not covered by health insurance and that at a price of $50,000 each, 10,000 such surgeries are demanded each year. LO24.2 a. Suppose that health insurance begins to cover hip replacement surgeries and that everyone interested in getting a hip replacement has health insurance. If insurance covers 50 percent of the cost of the surgery, by what percentage would you expect the quantity demanded of hip replacements to increase? What if insurance covered 90 percent of the price? If insurance covers 50 percent of the bill, just assume that the price paid by consumers falls 50 percent.) b. Suppose that with insurance companies covering 90 percent of the price, the increase in demand leads to a jump in the price per hip surgery from $50,000 to $100,000. How much will each insured patient now pay for a hip replacement surgery? Compared to the original situation,…arrow_forward
- Suppose demand and supply are given by: Q^d=14-0.5P and Q^s=0.25P-1. Determine the equilibrium quantity and price in this market. Show the equilibrium graphically. Suppose a $12 excise tax is imposed on the good.Determine new supply and the new equilibrium quantity and price. How much does producers' revenue change? How much tax revenue does the government earn?arrow_forwardAssume the following values for attached figures: Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags. The market equilibrium price is $45 per bag. The price at a is $85 per bag. The price at c is $5 per bag. The price at f is $59 per bag. The price at g is $31 per bag. Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions. LO4.2 a. What is the dollar value of the total surplus (producer surplus plus consumer surplus) when the allocatively efficient output level is being produced? How large is the dollar value of the consumer surplus at that output level? b. What is the dollar value of the deadweight loss when output level Q2 is being produced? What is the total surplus when output level Q2 is being produced? c. What is the dollar value of the deadweight loss when output level Q3 is produced? What is the dollar value of the total surplus when output level Q3 is produced?arrow_forwardHow is L = 5.5? Please explain extensivelyarrow_forward
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