Chapter 4 homework

$4.50; $2.00

Consider the information given in the table on four consumers in the market for premium bottled water. If the price of a bottle of premium bottled water is​ $1.50, the total consumer surplus received by these consumers is ​$_______. ​(Enter your response rounded to two decimal​ places.) Once the price of a bottle of premium bottled water rises to​ $2.50, the total consumer surplus received by these consumers is ​$_______. ​(Enter your response rounded to two decimal​ places.)

net; total

Consumer and producer surplus measure the​ _____ benefit rather than the​ _____ benefit.

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum

Economic efficiency is _____.

consumer; producer;​ maximum; equilibrium

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​ _____ when the market is in​ _____.

the additional cost of producing one more unit; It shows the willingness of firms to supply a product at different prices.

Marginal cost is _____. Why is the supply curve referred to as a marginal cost​ curve?

some people​ win, some people​ lose, and there is a loss of economic efficiency

When the government imposes price floors or price​ ceilings, _____.

normative statement. The statement is concerned with what should be

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a _______.

a market in which buying and selling take place at prices that violate government price regulations

A black market is ____.

larger with demand curve D1 because there is a larger area between the demand curve and the market equilibrium price; the same for both D1 and D2 because there is no difference in the area between the market equilibrium price and the supply curve

Consider the graph at right. Comparing demand curves D1 and D2 ​, the consumer surplus is _____. Comparing demand curves D1 and D2 ​, the producer surplus is _____.

$7.00; $4.50; under the demand curve and above the​ $0.75 price for each individual who buys and consumes orange juice; under the demand curve and above the​ $1.50 price for each individual who buys and consumes orange juice

Consider the information given in the table on four consumers in the market for orange juice. If the price of a bottle of orange juice is​ $0.75, the total consumer surplus received by these consumers is ​$______. ​(Enter your response rounded to two decimal​ places.) Suppose the price of a bottle of orange juice rises to​ $1.50. Once the price of a bottle of orange juice rises to​ $1.50, the total consumer surplus received by these consumers is ​$_____. ​(Enter your response rounded to two decimal​ places.) If the price of a bottle of orange juice is​ $0.75, then consumer surplus is an amount equal to the area ______. If the price of a bottle of orange juice is​ $1.50, then consumer surplus is an amount equal to the area ______.

the difference between the highest price a consumer is willing to pay and the price the consumer actually pays; decreases; increases

Consumer surplus is _____. How does consumer surplus change as the equilibrium price of a good rises or​ falls? As the price of a good​ rises, consumer surplus ______, and as the price of a good​ falls, consumer surplus _____.

C & E

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the​ diagram, deadweight loss is equal to the​ area(s): _____.

C; B and D

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area ____ and the deadweight loss is equal to areas ____.

B; C and E

In the diagram to the​ right, illustrating a binding price floor at P1​, the amount of consumer surplus transferred to producers is represented by area _____ and the deadweight loss is equal to areas _____.

D and F; E and G

In the diagram to the​ right, illustrating a​ per-unit tax equal to P2 minus P3​, tax revenue is represented by the areas _____ and the excess burden of the tax is represented by areas _____.

is less than; inefficient

In the​ diagram, marginal benefit ______ marginal cost at output level Q3. This output level is considered economically _____.

decreases by areas​ B, C, and D.; increases by area B and decreases by areas F and G

Suppose that a frost in Florida reduces the size of the orange​ crop, which causes the supply curve to shift to the left​ (from Supply 1 to Supply 2​). As a​ result, consumer surplus _____. Producer surplus _____.

decreases by areas​ B, C, and D; increases by area B and decreases by areas F and G

Suppose that a frost in Florida reduces the size of the orange​ crop, which causes the supply curve to shift to the left​ (from Supply 1 to Supply 2​). As a​ result, consumer surplus ______. Producer surplus _____.

the actual division of the burden of a tax between buyers and sellers in a market

Tax incidence is _____.

$11; $21

Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for ​$14​, a second lawn for ​$15​, and a third lawn for ​$20. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay ​$35 to have her lawn​ mowed, Mr. Wilson would be willing to pay ​$26​, and Ms. Smith would be willing to pay ​$20. If Tim offers to mow lawns for ​$20 ​each, what will be his producer​ surplus? ​$_____. ​(Enter a numeric response using an​ integer.) Considering Mrs.​ Jones, Mr.​ Wilson, and Ms. Smith​ together, what will be their consumer​ surplus?

consumer; A

______ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area _____.

producer; B

______ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area _____.

maximum; minimum

A price ceiling is a legally determined ______ price that sellers may charge. A price floor is a legally determined ______ price that sellers may receive.

A, B,​ C, D,​ E, F,​ G, H, I; D, F, G; K, L, M; depends on the actual size of the loss and gain

An article in the Wall Street Journal discussed research at Ohio State University that may lead to producing carbon black—an important input in automobile tire making—out of​ eggshells, tomato​ skins, and other food waste. According to the​ article, this research could lead to a reduction in the cost of producing tires. ​Source: Daniel​ Akst, "Making Tire Filler from​ Eggshells" Wall Street Journal​, March​ 9, 2017. Refer to the graph at​ right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve. a. These falling costs result in a consumer surplus in the market for tires represented by areas _______. b. These falling costs result in a loss of producer surplus equal to areas _____. There is a gain of producer surplus equal to areas _____. The actual net change in producer surplus _____.

the additional benefit from consuming one more unit; It shows the willingness of consumers to purchase a product at different prices.

Marginal benefit is _____. Why is the demand curve referred to as a marginal benefit​ curve?

Her willingness to pay was no less than​ $47, so she did not receive negative consumer surplus from this trip.

Uber is an app people use to arrange transportation with drivers who use their own cars for this purpose. Customers pay for their rides with the smartphone app.​ Uber's prices fluctuate with the demand for the service. This​ "surge pricing" can result in different prices for the same distance traveled at different times of day or days of the week. Annie​ Lowrey, a writer for the New York Times​, explained that she paid​ $13 for a 10 p.m.​ two-mile trip in downtown​ Washington, D.C. on New​ Year's Eve. Three hours later she paid​ $47 for the return trip to her home. ​Source: Annie​ Lowrey, "Is​ Uber's Surge-Pricing an Example of High Tech​ Gouging?" New York Times​, January​ 10, 2014. Did she receive negative consumer surplus on her return​ trip?

the area of the blue​ triangle, which is​ one-half times a base of 111 million times a height of​ $51.87

The Apply the Concept states that the value of the area representing consumer surplus from​ Uber's service was​ $2.88 billion per year for the four cities involved in the study. Use the information from the graph in the Apply the Concept to show how this value was calculated. Consumer surplus is equal to _____.