Old_midterm questions - Question 3(23 points Consider the...

Question 3 (23 points)
Consider the perfectly competitive market for jelly beans.
a. (10 points) In a diagram below, show the consumer and producer surplus for this
market.
b. (10 points) Suppose the government decides to tax the producers of jelly beans.
In a new diagram below, show consumer surplus, producer surplus, government
revenue, and deadweight loss.
c. (3 points) Label, in either your graph from a or b, the efficient quantity (label this
Q* and write below which graph you have labeled it on.)

Question 3 (15 points)
Consider the perfectly competitive market for hatch peppers.
d. (7 points) Suppose the government decides to tax the consumers of Hatch
peppers. In a diagram below, show the effects of this tax, including all pre and
post tax prices and quantities.
e. (8 points) In the box below, or clearly labeled on your diagram above, show
consumer surplus, producer surplus, government revenue, and deadweight loss
after the tax.
Consumer Surplus Producer Surplus Government Revenue Deadweight Loss

Question 5 (15 points)
Consider the perfectly competitive market for umbrellas. Demand for umbrellas is more
inelastic than supply.
a. (9 points) On a clearly labeled supply and demand diagram show what happens if the
government decided to tax the demanders of umbrellas.