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If the supply curve is perfectly inelastic and a per-unit tax is imposed on consumers, will
there be a deadweight loss to society? Why or why not?
A per-unit tax imposed on suppliers will shift the supply curve up by the amount of the tax.
Illustrate the deadweight loss from the tax
After a late-winter freeze in Florida, the supply curve for early-season blueberries was estimated as: QS = - 500 + 5 000 P The demand curve for blueberries is:
QD = 19 000 – 1 500 P P : measured in dollars, Q : measured in pints
3) How much are consumers willing to pay for blueberries when this many pints of blueberries are sold? What is the maximum value of time consumers would be willing to spend waiting in line for blueberries?
4) Suppose that sellers of blueberries must spend $0.50 per pint to pick blueberries. The sellers try to evade the price ceiling by selling only U-pick blueberries. Consumers value U-pick pints of blueberries at 0.50 per pint less than picked blueberries because of the opportunity cost of picking time. If all blueberries sold are U-pick blueberries, how many pints of blueberries are sold?
4) What is the equilibrium price of U-pick blueberries?
5) Is the outcome in 4) more efficient than the outcome in 2)?
After a late-winter freeze in Florida, the supply curve for early-season blueberries was
estimated as: QS = - 500 + 5 000 P.The demand curve for blueberries is:
QD = 19 000 – 1 500 P
P: measured in dollars, Q: measured in pints
1) Before the freeze, the equilibrium price was $0.50 per pint. Find the equilibrium P and Q after the freeze
2) There is a price ceiling in place of $1.00 per pint. If there is no illegal trading, how many pints of blueberries will be sold?
Use diminishing marginal utility to explain why millionaires often do not have many homes, even if they can afford it
The world producer price for baseball is $24 per dozen, and almost all of them are produced
outside the United States. Suppose the U.S. demand curve and supply curves are:
QD = 100 000 – 2 000 P
QS = - 10 000 + 1 000 P
P : price per dozen
Q: dozens
1) Before a tariff is imposed, what is the U.S. equilibrium price? Domestic consumption?
Domestic production? imports?
2) Congress has decided to help the baseballmanufacturing industry by imposing a tariff of $ 6 per dozen. What are the new equilibrium price, domestic consumption, domestic production, and imports?
3) What are the losses to U.S. consumers, gains to U.S. producers, and deadweight loss? (Hint: The area of a trapezoid is [height] [ base 1 + base 2 ] / 2 where base 1 and base 2 are the parallel sides of the trapezoid.)
The demand for milk and supply of milk in the U.S: QD = 152 – 20 P , Qs = - 4 + 188 P
Q: measured in billions of gallons per year P is measured in dollars per gallons.
1) Calculate the competitive market equilibrium price and quantity and total surplus at that price. Illustrate your answer.
2) If price floor Pf = $1.25, how much do the government pay to buy the excess supply?
Suppose a competitive firm has long run total costs TC = 300 + 5 Q + 3 Q2. MC = 5 + 6 Q Now a tax is imposed on the firm—for each unit of output produced, it must pay $ 15 in taxes. Derive the new MC curve. What is minimum ATC? At what output does this occur?
A firm has
MC = 10 + Q and AVC = 10 + Q / 2
If FC = 5,000 and the market price is 100, findthe firm’s maximum profit. Will the firm continue to operate in the SR? In the LR? Explain
A firm has short run TC:
TC = 100 + 2 Q + Q2 with MC = 2 + 2 Q
1) Find ATC and AVC functions
2) If P = 25, how much will the firm produce in the SR?
3) If P = 20, how much will the firm produce in the SR?
4) Assuming the firm has the same cost curves in the LR, how much will it produce in the LR?
