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Quiz 4 Answers - $14 per bushel what is the government's...

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ECO 304K: INTRODUCTION TO MICROECONOMICS Unique # 33645, Fall 2009, Prof. Wiseman Quiz 4 Select the single best answer for each question. 1. Consumers' surplus arises because: A. Consumers receive utility from the goods they purchase B. Consumers tend to consume more goods than they actually need C. Consumers place a higher value on some goods purchased than the prices they actually pay to acquire those goods D. Producers add hefty profit margins to many of the goods that consumers buy 2. What is the consumer surplus in the market for widgets, above (before any government intervention)? 3. What is the amount of social loss or deadweight loss if a price ceiling of $4 is placed on widgets? 4. Consider the market described in the table above. If the government agrees to purchase any excess output at the price of
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Unformatted text preview: $14 per bushel, what is the government's expenditure on the excess output? A. $168,000 B. $504,000 C. $336,000 D. $140,000 Quiz 4 Key 1. C. Consumer surplus is the difference between the value the consumer places on a good and the amount the consumer actually paid. 2. B. Consumer surplus is the triangle with one side from $6 to $11, and the other side from quantity 0 to quantity 100. The area is ½ x (11 – 6) x 100 = 250. 3. B. Deadweight loss is the triangle with one side from $4 to $9, and the other side from quantity 40 to quantity 100. The area is ½ x (9 – 4) x (100 – 40) = 150. 4. C. At price $14, the quantity is supplied is 36,000, and the quantity demanded is 12,000, so the surplus is 24,000. Government expenditure is $14 x 24,000 = 336,000....
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