Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 6, Problem 18APA
To determine
A subsidy in the market of corn.
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The government has decided that the free-market price of cheese is too low.
Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese?
Producers of cheese complain that the price floor has reduced their total revenue. Is this possible? Explain.
In response to cheese producers’ complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?
1) Below is the demand and supply schedule for the market for personal chefs. These are chefs that are hired to come into the client’s home to prepare meals for them. Show all your calculations used to answer the following questions.
a) Calculate the equilibrium price and quantity
b) Calculate the consumer surplus when this market is in equilibrium.
c) Calculate the producer surplus, when this market is in equilibrium.
d)calculate the excess demand or supply at the price of $35,$70,$25 and $65
e) If tax of 5$ imposed compute the consumer and producer tax burden
Price per hour
Qty supplied
Qty demanded
20
0
29
25
1
26
30
3
23
35
5
20
40
7
17
45
9
14
50
11
11
55
13
9
60
15
7
65
17
5
70
19
3
75
21
1
80
23
0
In an effort to curb the use of cigarettes, the US has utilized taxes to inhibit the purchase of them to help the population’s health. The price for cigarettes without a tax would be $2.50/pack. In that market, 950M cigarette packs would be the quantity sold each year. The government has inserted $2.00 tax/pack of cigarette. This tax reduces the amount of quantity demand to 600M cigarettes and the $2 tax is burdened 25% by the producer and 75% by the consumer.
Please illustrate a supply and demand chart that indicates the areas of consumer surplus, tax revenue, deadweight loss, and producer surpluses with both quantities shown.
Chapter 6 Solutions
Macroeconomics
Ch. 6.1 - Prob. 1RQCh. 6.1 - Prob. 2RQCh. 6.1 - Prob. 3RQCh. 6.1 - Prob. 4RQCh. 6.2 - Prob. 1RQCh. 6.2 - Prob. 2RQCh. 6.2 - Prob. 3RQCh. 6.2 - Prob. 4RQCh. 6.2 - Prob. 5RQCh. 6.3 - Prob. 1RQ
Ch. 6.3 - Prob. 2RQCh. 6.3 - Prob. 3RQCh. 6.3 - Prob. 4RQCh. 6.3 - Prob. 5RQCh. 6.4 - Prob. 1RQCh. 6.4 - Prob. 2RQCh. 6.4 - Prob. 3RQCh. 6.4 - Prob. 4RQCh. 6.4 - Prob. 5RQCh. 6.5 - Prob. 1RQCh. 6.5 - Prob. 2RQCh. 6.5 - Prob. 3RQCh. 6.5 - Prob. 4RQCh. 6 - Prob. 1SPACh. 6 - Prob. 2SPACh. 6 - Prob. 3SPACh. 6 - Prob. 4SPACh. 6 - Taxes (Study Plan 6.3) 5. The table in the next...Ch. 6 - Prob. 6SPACh. 6 - Prob. 7SPACh. 6 - Prob. 8SPACh. 6 - Prob. 9APACh. 6 - Prob. 10APACh. 6 - Prob. 11APACh. 6 - Prob. 12APACh. 6 - Prob. 13APACh. 6 - Prob. 14APACh. 6 - Prob. 15APACh. 6 - Prob. 16APACh. 6 - Prob. 17APACh. 6 - Prob. 18APACh. 6 - Prob. 19APACh. 6 - Prob. 20APACh. 6 - Prob. 21APACh. 6 - Prob. 22APACh. 6 - Prob. 23APA
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- The government is interested in imposing a tax on the local gasoline market. Using a tax modified demand, indicate in an appropriate diagram the effect of this tax on this market, labeling everything. Explain what happens to demand, supply, equilibrium price and equilibrium quantity exchanged and why. please give me correct answer with proper explanation and diagramarrow_forwardThe government imposes a price floor in the market for peanuts in order to stabilize or raise farmer's incomes. a) what is the impact on consumer surplus and producer surplus. b) what would happen to the quantity demanded and the quantity supplied of peanuts? c) would the amount of market exchange increase or decrease or remain the same. Please support answers with graph and explain.arrow_forwardAssume that the government sets a price floor in the market for wheat and the price floor is set below themarket equilibrium of wheat. Discuss carefully THREE points showing effectiveness of this policy on the market. Please provide with 3 pointsarrow_forward
- Price per litre ($) Quantity Demanded in 000 Quantity Supplied in 000 litres (per Month) litres (per month) 11 . 0 27 10 2 25 9 4 23 8 6 20 7 8 17 6 10 15 5 12 12 4 14 10 3 16 7 2 18 5 1 3 3 Construct the demand and supply curves for gasoline to show the market equilibrium for gasoline, Given a new government policy in Microland, Gasoline producers have started to obtain subsidies from the government. Construct a NEW diagram to show the impact of the subsidy on the market equilibrium. Explain the effect of the subsidy on the market forces and the equilibrium point. Nb. Answer question number 3 please.arrow_forwardwhat would happen in the market for lobster of the government reduces the income tax and lobsters are a normal goodarrow_forwardLars consumes only potatoes and herring. When the price of potatoes was $9 per sack and the price of herring was $5 per crock, he spent his entire income to buy 5 sacks of potatoes and 10 crocks of herring per month. Now the government subsidizes potatoes. Market prices haven’t changed, but consumers get a subsidy of $5 for every sack of potatoes consumed. To pay for this subsidy, the government introduced an income tax. Lars pays an income tax of $20 per month. If s is the number of sacks of potatoes and c is the number of crocks of herring, what is Lars’s new budget constraint?arrow_forward
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