DOC PREVIEW
USC ECON 203 - Producer and Consumer Surplus

This preview shows page 1 out of 4 pages.

Save
View full document
View full document
Premium Document
Do you want full access? Go Premium and unlock all 4 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 4 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

Name: ______________________________________________________________Producer and Consumer SurplusDeadweight loss of taxationHomework – Week 5Name: ______________________________________________________________Producer and Consumer Surplus1) For the following exercises you will start by drawing the initial demand, supply and marking the initial producer and consumer surplus. You will then make the necessary shifts in supply and/or demand, and mark the new producer and consumer surplus. For each exercise, say if the producer and consumer surplus increased, decreased, or if the change is ambiguous.A) Consumers are becoming more concerned with the environment and want to buy more electric cars. What happens in the electric car market to consumer and producer surplus?B) Due to a lot of new entertainment online, consumers are less willing to pay for cable channels. What happens in the cable channel market to consumer and producer surplus?2) John earns $50 per hour at his current job, and also designs websites on the side as a freelancer. Markneeds a new website for his ecommerce site, which has a value of $1000 for him. Mark hires John to build the website, and Mark will pay John $300. It will take John 4 hours to build the site.A) What is John’s cost of building the site? And what is Mark’s willingness to pay?B) Calculate consumer surplus and producer surplus.3) Tickets for the Warriors next playoff game are being sold at $100. There are 4 friends with the following willingness to pay for that game: Kate $200, Peter $50, Steve $80, and Mary $150. Who goes tothe game and what’s their consumer surplus? What is the total consumer surplus.4) For the following questions circle the correct answer.A) An efficient allocation of resources maximizes:a) consumer surplus.b) producer surplus.c) consumer surplus plus producer surplus.d) consumer surplus minus producer surplus.B) When a market is in equilibrium, the buyers are those with the ____ willingness to pay, and the sellersare those with the _____ costs.a) highest, highestb) highest, lowest.c) lowest, highest.d) lowest, lowest.Deadweight loss of taxation1) Consider the following demand and supply schedule for dog food in the US:Price Quantity DemandedQuantity Supplied$0.00 6000 0$5.00 5000 1000$10.004000 2000$15.003000 3000$20.002000 4000$25.001000 5000$30.000 6000A) Draw the supply and demand curves. Calculate and mark on the graph equilibrium price and quantity. Calculate and plot on the graph consumer and producer surplus. What is the total surplus?B) Government imposes a $10.00 tax per unit of dog food sold. Using a tax wedge of $10.00, calculate and plot on the graph the following: quantity with tax, price paid by consumers, price received by producers, consumer surplus, producer surplus, and tax revenue.C) Compare total surplus of A and B. What is the deadweight loss?2) For the following questions circle the correct answer.A) The Laffer curve illustrates that, in some circumstances, the government can reduce a tax on a good and increase thea) deadweight loss.b) government’s tax revenue.c) equilibrium quantity.d) price paid by consumers.B) If a policymaker wants to raise revenue by taxing goods while minimizing the deadweight losses, she should look for goods with _____ elasticities of demand and _____ elasticities of supply. a) small, smallb) small, largec) large, smalld) large,


View Full Document

USC ECON 203 - Producer and Consumer Surplus

Download Producer and Consumer Surplus
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Producer and Consumer Surplus and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Producer and Consumer Surplus 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?