Problem Set 4

Problem Set 4 - h. Explain why the graph that is shown...

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Chapter 7 Welfare Economics, Taxation and Government Intervention You don’t have to turn in this problem set. I have already uploaded the answer key. 1. Answer the following questions based on the graph that represents J.R.'s demand for ribs per week of ribs at Judy's rib shack. a. What is the magnitude of J.R.'s consumer surplus at the equilibrium price? b. At the equilibrium price, what is the amount of total surplus in the market? c. If the government levies a $5 excise tax on each piece of ribs sold, what is the amount of total surplus in the market? d. If the government levies a $5 excise tax on each piece of ribs, what is the amount of the deadweight loss in the market? e. If the price floor of ribs is $10, what is the amount of J.R.'s consumer surplus?
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f. If the price floor of ribs is $10, what is the amount of Judy.'s producer surplus? g. If the price ceiling of ribs is $5, what is the amount of Judy.'s producer surplus?
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Unformatted text preview: h. Explain why the graph that is shown verifies the fact that the market equilibrium (quantity) maximizes the sum of producer and consumer surplus. 2. Using the graph below, answer the following questions about hammers. a. What is the equilibrium price of hammers before trade? b. What is the equilibrium quantity of hammers before trade? c. What is the price of hammers after trade is allowed? d. What is the quantity of hammers imported after trade is allowed? e. What is the amount of consumer surplus before trade? f. What is the amount of consumer surplus after trade? g. What is the amount of producer surplus before trade? h. What is the amount of producer surplus after trade? i. What is the amount of total surplus before trade? j. What is the amount of total surplus after trade? k. What is the change in total surplus because of trade?...
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Problem Set 4 - h. Explain why the graph that is shown...

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