A per unit subsidy increases both consumer and producer surplus, but results in a deadweight loss. Indicate whether the statement is true or false ANSWER True . The government expenditure more than offset the gains to consumer and producer surplus resulting in a deadweight loss.
Date: September 9th, 2020
“Supporters of import restrictions and protectionist policies place greater weight on producer welfare than on consumer welfare.” Comment. What will be an ideal response? ANSWER Import restrictions increase the producer surplus of domestic producers. Consumer surplus, however, decreases by more than producers gain. Thus, the statement seems to be correct.
Date: September 9th, 2020
Tariffs and quotas create a loss in social welfare because A) producer surplus declines. B) revenues from tariffs are misspent. C) consumer surplus declines. D) All of the above. ANSWER C
Date: September 9th, 2020
Suppose a consumer advocacy group has convinced legislators that vitamin pills should be free to consumers. Such a policy would enhance the health of the citizenry, they argue. Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting output and social welfare from such a policy. Compare this result to […]
Date: September 9th, 2020
Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus. Indicate whether the statement is true or false ANSWER False. One impact of a supply restriction is an exchange from consumers to producers. The net effect on social welfare is […]
Date: September 9th, 2020
The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, then social welfare will most likely A) not change, but there will be a transfer from consumer to producer. B) not change, but there will be […]
Date: September 9th, 2020
Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk. The group argues that such a policy would save the “family farm.” Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting price, output […]
Date: September 9th, 2020
If a city decides to restrict the number of pizza parlors, A) the price of pizza will increase. B) pizza parlors will make higher profits. C) total welfare will decrease. D) All of the above. ANSWER D
Date: September 9th, 2020
An increase in the deadweight loss (DWL) means A) an additional reduction in welfare by one group that is not offset by a gain to another group. B) an additional reduction in welfare by one group that is offset by a gain to another group. C) an additional increase in welfare by one group that […]
Date: September 9th, 2020
If a market produces a level of output that exceeds the competitive equilibrium output, then A) social welfare will be higher. B) producer surplus will be higher. C) marginal cost will exceed price. D) All of the above. ANSWER C
Date: September 9th, 2020
