201-tutorial-4

# 201-tutorial-4 - Econ 201 Tutorial#4 Date Week of Feb 8-14...

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Econ 201 Tutorial #4 Date: Week of Feb. 8-14, 2010 Coverage: Mainly Chapter 5 Welfare Economics I. Multiple Choice Questions: 1. The term "consumer surplus" refers to a. the diminishing marginal utility that consumers receive from additional consumption of a good. b. the total amount paid for the purchase. c. the total value that a consumer places upon a good. d. the area under the demand curve. e. the difference between the value of a purchase and the total amount paid for the purchase. 2. If the government imposes a price ceiling below the equilibrium price, then a. the quantity consumed will rise. b. consumer surplus will fall. c. consumer surplus may rise or fall. d. the price will rise. e. consumer surplus will rise. 3. If the government introduces a subsidy into a market, then a. consumer surplus will rise. b. the quantity consumed will rise. c. consumer surplus will fall. d. both a and b. e. both b and c. 4. Suppose demand is Qd=12-2P and supply is Qs=P. Producer surplus in equilibrium is a. \$4 b. \$8 c. \$12 d. \$16 e. \$18 5. Continue from #4: The value of consumer surplus is a. \$4 b. \$8 c. \$12 d. \$16 e. \$18 6. Currently Joe and Hana are consuming the same amount of strawberries, but Joe's demand curve is much more elastic than Hana's. Which statement is true? a. Hana's consumer surplus exceeds Joe's. b. Any comparison of consumer surplus depends on the price of strawberries. c. Hana's consumer surplus equals Joe's. d. No statement can be made comparing consumer surpluses. e. Joe's consumer surplus exceeds Hana's. 7. At the efficient quantity of a good, a. producer surplus exceeds consumer surplus by the greatest possible amount. b. total consumer surplus is zero. c. the sum of consumer surplus and producer surplus is maximized. d. total producer surplus is zero. e. consumer surplus exceeds producer surplus by the greatest possible amount. 1

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II. Short Questions 1. Consider the market for whale watching boat rides in Tofino, British Columbia. In this market, the whale watching boat drivers are producers and the whale watching riders are consumers. The demand curve and supply curves in the market for whale watching rides are given by Demand: P = 10 – 0.5Q Supply: P = 0.5Q (i) Find the equilibrium price and quantity in the market for whale watching rides. (ii) Calculate the consumer surplus and producer surplus in the market for whale watching rides. Sum consumer and producer surplus to get the total surplus in the market for whale watching rides. Assume now that the government in Tofino imposes a quota of 8 rides per year.
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201-tutorial-4 - Econ 201 Tutorial#4 Date Week of Feb 8-14...

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