What is total surplus? The difference between the maximum amount a buyer will pay for a good and the cost to the seller. The sum of the consumer's willingness to pay and the cost to the seller. The difference between the maximum amount a buyer will pay for a good and the price they actually have to pay. 9.097? The sum of the consumer's willingness to pay and the price they actually have to pay. Binding price ceilings lead to permanent causing Non-binding price ceilings lead to causing the market price toThe diagram to the right illustrates the market for outdoor concert tickets in a park in the middle of a residential area in a particular town. Ticket prices are measured in dollars (the grid is drawn for $2.50 P $50- increments) and ticket quantities are measured in thousands. The locals are not happy about the increased traffic congestion and noise that accompany each concert. Note that supply curve S, $45- represents the marginal private cost of the concerts. What is the cost of the externality per concert ticket? $40- $35- . . . $30- The cost of the externality is $ per concert ticket sold. $25.00 (Round to the nearest cent as needed.) $20-$17.50 $15- $10- $5 $0- 12 16 D 5 10 15 20 25 30 Q of Tickets (Thousands)Which of the following goods are rival in consumption? . Common resources and club goods A B. Public goods and common resources C. Common resources and private goods D . Club goods and private goods Based on the diagram, what is the consumer's burden of the tax? $ What is the producer's burden of the tax? $ What is the amount of the tax? 35 The burden of the tax is V the elasticity of supply. producers because the elasticity of demand 200 180 160 140 120 100 80 40 20 60 Price 0 20 40 60 80 100 120 140 160 180 Demand and supply in the market for bus fare in a smaller city are given by Qd = 2100 500P and QS =200P. Complete parts a and b below. a) What are equilibrium price and quantity? The equilibrium price is P = $ per fare and the equilibrium quantity is Q = fare(s). (Simplify your answers. Type integers or decimals.) b) Suppose the local government feels that the fare is too high and decides o impose a price ceiling of $2.00 per bus trip. How many bus trips will be taken and what will be the deadweight loss in surplus due to the price ceiling? HINT: Draw it first, The number of bus trips that will be taken is (Simplify your answer.) The deadweight loss in surplus due to the price ceiling is 8% (Round to the nearest cent as needed.) The diagram to the right depicts the market for cough medicine in a small town The quantity of cough medicine is measured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier because people who have colds and flus buy and take the medicine and reduce the spread of infection. Which demand curve represents the marginal private benet of cough medicine? What is the market equilibrium? Demand curve Y represents the marginal private benet (MP3) of cough medicine Because marginal private benefits V the benets of the V externality, marginal private benefits are V than the marginal social values, The market equilibrium price is $ and quantity is bottle(s). $20 $16 $12M\" O 10 20 30 4O 50 9,0 The diagram to the right depicts the market for cough medicine in a small town. The quantity of cough medicine is measured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier because people who have colds and flus buy and take the medicine and reduce the spread of infection Which demand curve represents the marginal private benefit of cough medicine? What is the market equilibrium? Demand curve D2 represents the marginal private benefit (MP8) of cough medicine. Because marginal private benets reflect benefits are higher than the marginal social values The market equilibrium price is $ and quantity is the benefits of the positive bottle(s). externality, marginal private $28 $24 $20 $16 $8 $4 $0 gangliaw Elm\" //' ' 20 30 40 50 9,0 E'x. Suppose a tax of $25 is placed on consumers in this market. Draw the after-tax curve. 150 145 140 135 130 125 120 115 110 105 100 95 90 85 80 75 70 65 60 55 50 45 40 Price 200 400 600 800 Quantity 1000 1200 99 Demand and supply in the market for cases of soda pop is given by Qd = 360 9F and Q5 = 3P. Complete parts a through f below. a) What are equilibrium price and quantity? The ecuilibrium price is P = $ and the equilibrium quantity is Q = (Simplify your answers. Type integers or decimals.) b) Suppose the government is concerned about too much sugar in peoples' diets and decides to tax soda pop sellers $3 per case. What is the equation of the new supply curve? Let PC be the price paid by the consumer. QS = PC + ( (Simplify your answers. Type integers or decimals.) c) What is the new, after-tax equilibrium? The after-tax equilibrium price is $ and the quantity is (Simplify your answers. Type integers or decimals.) d) How much do consumers now pay and how much do sellers end up receiving? Consumers will now pay $ and rms will receive 25 (Simplify your answers. Type integers or decimals.) e) What is the value of producer surplus both before an: after the tax was levied? HINT: Draw it. The value of producer surplus before the tax was levied is 85 (Round to the nearest cent as needed.) The value of producer surplus after the tax was levied is $ (Round to the nearest cent as needed.) f) What is the deadweight loss due to the tax? HINT: Draw it. The deadweight loss is $ . (Round to the nearest cent as needed.) What happens to consumer and producer surplus when the price changes? When the price falls, consumer surplus falls and producer surplus falls. When the price rises, consumer surplus rises and producer surplus falls. When the price falls, consumer surplus rises and producer surplus falls. When the price rises, consumer surplus rises and producer surplus rises. Suppose the market is in equilibrium. Then the government imposes a per unit tax in the market. Consumers bear a smaller burden of the tax if the demand curve is 100 Pe Qe D2 120 9,0 What is the amount of the tax? $ What is total surplus before the tax? $ Total surplus V by$ as a result of the tax. 0 20 4O 60 80 100 120 Consider the following market for apartments in Jacksonville. Market demand is Qd = 400 5P. Market supply is 05 = 20P - 25. Equilibrium P = $ and equilibrium Q = D. A binding price ceiling can take a value . A non-binding price ceiling can take a value V . The diagram to the right illustrates the market for outdoor concert tickets in a park in the middle of a residential area in a particular town. Ticket prices are measured in dollars (the grid is drawn for $2.50 increments) and ticket quantities are measured in thousands. The locals are not happy about the increased trafc congestion and noise that accompany each concert. What is the socially optimal number and price of concert tickets? The socially optimal equilibrium occurs at a quantity of ticket(s) and price of $ $50 $45 $40 9,0 I\"? $35 $30--$ . 0 t $25 $20 5339......\" $1 $15 j $10 ' $5 l l $01 in in 10 15 Q 0 Tickets (Thousands) 20 25 Which of the following is an example of the free rider problem? (it A. Your neighbour agrees to split the cost of putting up a fence that divides your properties. When the fence is up, your neighbour refuses to contribute to the cost. {'3- B. You have a points card that allows you to earn and spend $20 for every 20,000 points collected. (7:- C. Your local superstore is having a promotion, "buy one get one free". {:3 D. You allow your neighbour to park on your driveway when you are away on a vacation. The diagram to the right illustrates the market for outdoor concert tickets in a park in the middle ofa residential area in a particular town. Ticket prices are measured in dollars (the grid is drawn for $2.50 increments) and ticket quantities are measured in thousands. The locals are not happy about the increased traffic congestion and noise that accompany each concert. Note that supply curve 31 represents the marginal private cost of the concerts and the market equilibrium (Q, P) is (9000, $20.00). What is the value of consumer surplus at market equilibrium? The value of consumer surplus at market equilibrium is 58 (Round to the nearest dollar as needed.) (6 $01 5 10 15 Q of Tickets (Thousands) 20 ,0 IL" Mary has several trees in her back yard. She enjoys them very much as they make her back yard very appealing and most importantly they provide her home with shade which results in lower utility bills. Mary saves $300 a year from not having to turn on her air conditioning as often. Mary's neighbour, Rachel is fed up with the trees. Come autumn, leaves fall into Rachel's back yard costing Rachel $100 to clean up the mess. What does the Coase Theorem suggest could be a possible solution to this problem? O A. Rachel pays Mary any value between $100 and $300 O B. Rachel pays Mary $301 to take care of the leaves O C. Mary pays $301 for the cleanup O D. Mary pays Rachel any value between $100 and $300Which of the following accurately defines marginal social costs? Marginal social costs = private costs A B. Marginal social costs = amount of the tax imposed C Marginal social costs = external costs + private costs D Marginal social costs = external costs The diagram to the right depicts the market for cough medicine in a small town. The quantity of cough medicine is measured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier because people who have colds and us buy and take the medicine and reduce the spread of infection. Note that demand curve D1 represents the marginal private benefit of cough medicine, market equilibrium occurs at (16, $10), the cost of the externality per bottle is $7, and the socially optimal equilibrium occurs at (24, $12). What is the deadweight loss due to the externality? The value of the deadweight loss due to the externality is 35 (Round to the nearest dollar as needed.) $28 $24 $20 $16 miim $8 $4 / $0 M 50 9,9 When comparing positive and negative externalities, which of the following are true? :: A3 A. With positive externalities, the market outcome leads to overproduction, whereas with negative externalities, the market outcome leads to underproduction. I] B. With both positive and negative externalities, the market outcome leads to overproduction. . With both positive and negative externalities, the market outcome leads to underproduction. 1:3 D. With positive externalities, the market outcome leads to underproduction, whereas with negative externalities, the market outcome leads to overproduction