Module #6 - Consumer and Producer Surplus

http://s1266.photobucket.com/user/bokurawauta/media/mank07t.48.056.1_zpsd9yuynsm.png.html At the equilibrium price, producer surplus is

$2,500.

Producer surplus equals the

amount received by sellers minus the cost to sellers.

http://s1266.photobucket.com/user/bokurawauta/media/mank07t.42.080.1_zpslvvcflxo.png.html?filters[user]=145534191&filters[recent]=1&sort=1&o=0 Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

between $5 and $7

The following table represents the costs of five possible sellers. Seller Cost Abby $1,600 Bobby $1,300 Dianne $1,100 Evaline $900 Carlos $800 Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

$1,050.

http://s1266.photobucket.com/user/bokurawauta/media/mank07t.53.143.1_zpsss3dt53a.png.html The vertical distance between points A and B represents a tax in the market. Total surplus with the tax in place is

$4,500.

If the government levies a $5 tax per MP3 player on buyers of MP3 players, then the price paid by buyers of MP3 players would likely

increase by less than $5.

If the government removes a binding price ceiling from a market, then the price received by sellers will

increase, and the quantity sold in the market will increase.

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

tax revenue increases at first, but it eventually peaks and then decreases.

If a price floor is not binding, then

there will be no effect on the market price or quantity sold.

At the equilibrium price of a good, the good will be sold by those sellers

whose cost is less than price.