Eco assigment 2

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Assignment #6:

Surplus and Deadweight Loss

(10 Points)

Terms and Definitions: Define the following terms

Consumer Surplus: _________________________________________________

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Deadweight Loss: __________________________________________________

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Producer Surplus: _________________________________________________

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Government Revenue: ______________________________________________

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Graphic Analysis:

A. Use the graphs below to answer the following questions.

1. What is the price and quantity of goods transacted before the government intervention?

Equilibrium Price = ________________ Equilibrium Quantity = ________________

2. What type of government intervention is depicted in the graph above? ______________________

3. Calculate the consumer and producer surplus before the intervention.

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Consumer Surplus = ______________ Producer Surplus = ___________________

4. Calculate the consumer and producer surplus after the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

5. Calculate the deadweight loss due to the intervention. ______________________

6. Which group benefits from this regulation? Which one is hurt by it? Explain your answers in

terms of changing surpluses.

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B. Use the graphs below to answer the following questions.

1. What is the price and quantity of goods transacted before the government intervention?

Equilibrium Price = ________________ Equilibrium Quantity = ________________

2. What type of government intervention is depicted in the graph above? ______________________

3. Calculate the consumer and producer surplus before the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

4. Calculate the consumer and producer surplus after the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

5. Calculate the deadweight loss due to the intervention. ______________________

6. Which group benefits from this regulation? Which one is hurt by it? Explain your answers in

terms of changing surpluses.

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____________________________________________________________________________________

____________________________________________________________________________________

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100

50

10050

D

S1

40

S2

60

25

C. Use the graphs below to answer the following questions.

1. What is the price and quantity of goods transacted before the government intervention?

Equilibrium Price = ________________ Equilibrium Quantity = ________________

2. What type of government intervention is depicted in the graph above? ______________________

3. Calculate the consumer and producer surplus before the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

4. Calculate the consumer and producer surplus after the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

5. What is the size of the subsidy? ________________

6. Which group benefits from this regulation? Which one is hurt by it? Explain your answers in

terms of changing surpluses.

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

100

50

10050

D

S1

60

60

40

S2

20

D. Use the graphs below to answer the following questions.

1. What is the price and quantity of goods transacted before the government intervention?

Equilibrium Price = ________________ Equilibrium Quantity = ________________

2. What type of government intervention is depicted in the graph above? ______________________

3. Calculate the consumer and producer surplus before the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

4. Calculate the consumer and producer surplus after the intervention.

Consumer Surplus = ______________ Producer Surplus = ___________________

5. Calculate the deadweight loss due to the intervention. ______________________

6. What is the size of the tax implemented? ____________________

7. What is the consumers’ tax burden according to the graph? ____________

8. How much of the price do producers get to keep after paying the tax to the gov’t? ___________

9. What is the producers’ tax burden according to the graph? _____________

10. How much tax revenue is generated by the tax? _________________

E. If all government interventions created deadweight loss (lost efficiency), why do we let

government intervene in markets?

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