PS4 Answer Key

PS4 Answer Key - Chapter 7 Welfare Economics, Taxation and...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7 Welfare Economics, Taxation and Government Intervention 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? 0.5*(12-8)*40=80 b. At the equilibrium price, what is the amount of total surplus in the market? 0.5*(12-2)*40=200 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? 0.5*(12-10)*20+5*20+0.5*(5-2)*20=150 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? 200-150=50 e. If the price floor of ribs is $10, what is the amount of J.R.'s consumer surplus? 0.5*(12-10)*20=20
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
f. If the price floor of ribs is $10, what is the amount of Judy.'s producer surplus? 5*20+0.5*(5-2)*20=130 g. If the price ceiling of ribs is $5, what is the amount of Judy.'s producer surplus? 0.5*(5-2)*20=30
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

PS4 Answer Key - Chapter 7 Welfare Economics, Taxation and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online