economy assignment

alateeq99

assignment_4govt_intervention.pdf

Home >Business & Finance homework help >Economics homework help >economy assignment

Assignment 4:

Government Intervention

(10 Points)

Terms and Definitions: Define the following terms

Consumer Surplus: _________________________________________________

__________________________________________________________________

Deadweight Loss: __________________________________________________

__________________________________________________________________

Excise Tax: _______________________________________________________

__________________________________________________________________

Externality: _______________________________________________________

__________________________________________________________________

Market Failure: ___________________________________________________

__________________________________________________________________

Minimum Wage: ___________________________________________________

__________________________________________________________________

Price Ceiling: ______________________________________________________

__________________________________________________________________

Price Floor: _______________________________________________________

__________________________________________________________________

Producer Surplus: _________________________________________________

__________________________________________________________________

Marginal Benefits Marginal Costs

Public Good: ______________________________________________________

__________________________________________________________________

Subsidy: __________________________________________________________

__________________________________________________________________

Discussion Questions: 1. When we decide to impose a tax, we must weigh the marginal benefits and marginal costs

associated with the taxation. Identify the marginal costs and marginal benefits of

imposing a tax on the production of cigarettes. Answer this question by completing the

table below.

2. What are the costs and benefits of imposing a subsidy to farmers for agriculture

production. Answer this question by completing the table below.

3. How does taxation and subsidies result in a redistribution of wealth from one group of

people to another.

________________________________________________________________________

Market for Cheeseburgers

$5.00

1 0

0 0

6 0

1 4

0 0

$3.00

$10.00

Market for Cheeseburgers

$5.00

1 0

0 0

$10.00

Graphic Analysis Questions Questions:

1. On the graph below, illustrate the consumer surplus and producer surplus created by the

market.

2. The total consumer surplus created by the cheeseburger market is _________________

3. The total producer surplus created by the cheeseburger market is _________________

4. The next graph illustrates a price ceiling of $3.00. Illustrate the consumer surplus, the

producer surplus, and the deadweight loss created by the regulation.

5. What is the new amount of output as a result of this regulation? _____________

6. Did output increase or decrease? __________________

7. What is the amount of the shortage created by this price ceiling? _________________

8. Calculate the consumer surplus after the regulation? _______________

9. Calculate the producer surplus after the regulation? _______________

10. Compare your answers from 8 and 9 to your answers from 2 and 3. Which group is

better off as a result of a price ceiling? ____________________

11. Calculate the deadweight loss associated with the price ceiling. ___________________

Market for Cheeseburgers

$5.00

1 0

0 0

$6.00

6 0

1 4

0 0

$4.00

$10.00

S + tax

Market for Cheeseburgers

$5.00

1 0

0 0

6 0

1 4

0 0

$7.00

$10.00

12. The next graph illustrates a price floor of $7.00. Illustrate the consumer surplus, the

producer surplus, and the deadweight loss created by the regulation.

13. What is the new amount of output as a result of this regulation? _____________

14. Did output increase or decrease? __________________

15. What is the amount of the surplus created by this price floor? _________________

16. Calculate the consumer surplus after the regulation? _______________

17. Calculate the producer surplus after the regulation? _______________

18. Compare your answers from 16 and 17 to your answers from 2 and 3. Which group is

better off as a result of a price floor? ____________________

19. Calculate the deadweight loss associated with the price floor. ___________________

20. The next graph illustrates an excise tax. Illustrate the consumer surplus, the producer

surplus, the tax revenue and the deadweight loss created by the regulation.

21. What is the new amount of output as a result of this regulation? _____________

22. Did output increase or decrease? __________________

23. What is the size of the tax illustrated by the graph above? _________________

24. Calculate the consumer surplus after the regulation? _______________

25. Calculate the producer surplus after the regulation? _______________

27. Calculate the deadweight loss associated with the price floor. ___________________

28. Calculate the tax revenue generated by the excise tax. ___________________

Market for Cheeseburgers

$5.00

1 0

0 0

6 0

1 4

0 0

$4.00

$10.00

S + Subsidy

Market for Doctors Visits in Irvine P

$95.00

1 0

0 0

$10.00

$200.00

2 0

2 5

0 0

29. The next graph illustrates an subsidized market for cheeseburgers. Illustrate the

consumer surplus, the producer surplus, the tax revenue and the deadweight loss created

by the regulation.

30. What is the price after the subsidy? __________

31. What is the quantity of transactions after the subsidy is implemented? _______________

32. Explain why the supply shifted to the left (down) ________________________________

______________________________________________________________________________

33. Below is a graph of a market for healthcare with a health insurance co-pay. Use the

graph to answer the following questions from the graph

34. What is the market price for a doctor’s visit before an insurance copay is instituted? __________

35. How many doctor’s visits will there be before the insurance copay is instituted? ___________

36. As a result of a $10 copay, how many doctor’s visits will there be? ______________

37. How much will the insurance companies have to pay doctors to incentivize them to supply the

increase amount of doctor’s visits? _________

38. If you did not have the health insurance what would your price be after the copay is

instituted? ________

39. Where does money for the extra insurance expenditures come from? ________________

________________________________________________________________________

40. What is the total expenditure in this market before the copay is instituted? ____________

41. What is the total expenditure in this market after the copay is instituted? ____________