Econ302-hw4-fall09 - Econ302 HomeworkAssignment4 ( Name...

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Econ302 Homework Assignment 4 Due Thursday October 29 (Questions in Part II will be graded) Name: Section:  PART I: Multiple Choice Questions 1. Suppose that a market is initially in equilibrium. The initial demand curve is 90 d P Q = - . The initial supply curve is 2 s P Q = . Suppose that the government imposes a $3 tax on this market. How much of this $3 tax is paid by consumers? a) $1. b) $1.50. c) $2. d) $3 2. Suppose that a market is initially in equilibrium. The initial demand curve is 90 d P Q = - . The initial supply curve is 2 s P Q = . Suppose that the government imposes a $3 tax on this market. What is the change in consumer surplus due to the tax? 1
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0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 0 200 400 Quantity Price 75 150 225 375 25 50 75 100 125 Demand Supply 3. Refer to the figure above. Suppose the government sets a price ceiling of $50 in this market. What is the change in the level of consumer surplus with the price ceiling? 4. Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as 60 d P Q = - ; the supply curve can be expressed as 0.5 s P Q = . Quantity is expressed in millions of boxes per month. Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month. What is the change in consumer surplus (per million boxes) associated with the quota? 5. Acreage limitations are used by the government because a) they induce less deadweight loss than cash transfers to farmers. b) they raise the market price of an agricultural product without the surpluses associated with price supports. c) the government wishes to lower agricultural prices. d) they are an effective way to feed poor people.
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