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##### FIU ECO2023 Assignment HW05 - Chapter 07 spring 14

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Question;1.;award:10 out of;10.00 points;Question and Exercise 7-1;Why isn?t the combination of consumer and producer surplus maximized if;there is either excess demand or supply?;2.;award:10 out of;10.00 points;Question and Exercise 7-2;Why does nearly every purchase you make provide you with consumer;surplus?;3.;award:10 out of;10.00 points;Question and Exercise 7-3;How is elasticity related to the revenue from a sales tax?.;4.;award:10 out of;10.00 points;Question and Exercise 7-5;Demonstrate the;welfare loss of;a. A restriction on output when supply is perfectly elastic. Graph the welfare;loss of a quantity restriction equal to a maximum of Q = 6.Instructions: Use the;3-point tool 'Loss' to identify the welfare loss. Click and drag each of;the endpoints of the shaded area until the triangle highlights the desired;region.;b. A tax t placed on suppliers (t = $4).Instructions: Use the;3-point tool 'Loss' to identify the welfare loss. Click and drag each of;the endpoints of the shaded area until the triangle highlights the desired;region.;Part c not included in this question.;d. A restriction on output when demand is perfectly elastic. Graph the welfare;loss of a quantity restriction equal to a maximum of Q = 4.Instructions: Use the;3-point tool 'Loss' to identify the welfare loss. Click and drag each of;the endpoints of the shaded area until the triangle highlights the desired;region.;5.award:10 out of10.00 pointsQuestion and Exercise 7-6Use the graph below that shows the effect of a $4 per-unit tax on suppliers to answer the following questions;a. Before the tax, equilibrium price is $ and;equilibrium quantity is.After the tax, equilibrium price is $ and;equilibrium quantity is.;b. Before the tax when the market is in equilibrium, producer;surplus is.After the tax, producer surplus is.;c. Before the tax when the market is in equilibrium, consumer;surplus is.After the tax, consumer surplus is.;d. The total tax revenue collected after the tax is implemented is $.;6.;award:10 out of;10.00 points;Question and Exercise 7-9;Suppose demand for cigarettes is inelastic and the supply of cigarettes;is elastic. Who would bear the larger share of the burden of a tax placed on;cigarettes?;7.;award:0 out of;10.00 points;Question and Exercise 7-10;If the demand for a good is perfectly elastic and the supply is elastic;who will bear the larger share of the burden of a tax on the good where the tax;is paid by consumers?;8.;award:10 out of;10.00 points;Question and Exercise 7-11;What percentage of a tax will the demander pay if price elasticity of;supply is 0.3 and price elasticity of demand is 0.7? What percentage will the;supplier pay?Instructions: Round your;answers to the nearest whole number.;Percent paid by demander: %.;Percent paid by supplier: %.Explanation;The demander will pay 30 percent of the tax [0.3/(0.7 + 0.3) ? 100], and;the supplier will pay the remaining 70 percent.;9.;award:10 out of;10.00 points;Question and Exercise 7-11 (algo);What percentage of a tax will the demander pay if price elasticity of;supply is 3 and price elasticity of demand is 2? What percentage will the;supplier pay?Instructions: Round your;answers to the nearest whole number.;Percent paid by demander: %.;Percent paid by supplier: %.Explanation;The demander will pay 60 percent of the tax [3/(3 + 2) ? 100], and the;supplier will pay the remaining 40 percent [2/(3 + 2) ? 100].;10.;award:10 out of;10.00 points;Question and Exercise 7-14;Calculate the;percentage of the tax borne by the demander and supplier in each of the;following cases:Instructions: Round your;answers to the nearest whole number.;Elasticity;of demand;Elasticity;of supply;Percent borne by demander;Percent borne by supplier;a.;ED = 0.3;ES = 1.2;%;%;b.;ED = 3;ES = 2;%;%;c.;ED = 0.5;ES = 1;%;%;d.;ED = 0.5;ES = 0.5;%;%;e. Summarize your findings regarding relative elasticity and tax burden.;Whichever group (producers or consumers) has the lower elasticity bears the;greater portion of the tax burden. Explanation;The demander will pay the percent of the tax equal to [ES/(ES + ED);? 100], and the supplier will pay the remaining percent of the tax equal to [ED/(ES + ED);? 100].;a. Percent borne by demander = 80, percent borne by supplier = 20.;b. Percent borne by demander = 40, percent borne by supplier = 60.;c. Percent borne by demander = 67, percent borne by supplier = 33.;d. Percent borne by demander = 50, percent borne by supplier = 50.;e. Consumers with relatively more elastic demand curves bear a smaller percent;of the tax. The same is true for producers.;b.;c.;d.;11.;award:10 out of;10.00 points;Question and Exercise 7-14 (algo);Calculate the;percentage of the tax borne by the demander and supplier in each of the;following cases:Instructions: Round your;answers to the nearest whole number.;Elasticity;of demand;Elasticity;of supply;Percent borne by demander;Percent borne by supplier;a.;ED = 1.2;ES = 0.3;%;%;b.;ED = 0.3;ES = 0.6;%;%;c.;ED = 1;ES = 0.5;%;%;d.;ED = 0.4;ES = 1.3;%;%;e. Summarize your findings regarding relative elasticity and tax burden.;Whichever group (producers or consumers) has the lower elasticity bears the;greater portion of the tax burden.;12.;award:10 out of;10.00 points;Question and Exercise 7-16;Demonstrate how a;price floor is like a tax on consumers and a subsidy to suppliers.Instructions: On the following;graph, use the tool 'TaxC' to show the area of the tax paid by;consumers. Then use the tool 'DWL' to show the deadweight loss caused by this;tax.;Instructions: On the following;graph, use the tool 'TransferC' to show the area of surplus;transferred to suppliers. Then use the tool 'DWL' to show the deadweight loss;caused by this price floor.;a. Who gets the revenue in the case of a tax?;b. Who gets the revenue in the case of a price floor?.;13.;award:10 out of;10.00 points;Question and Exercise 7-18;Use the graph below;to answer the following questions;a. Equilibrium price is $ and;equilibrium quantity is.;b. When the market is in equilibrium, producer surplus is.;c. When the market is in equilibrium, consumer surplus is;d. If price were held at $12 a unit, producer surplus would be and consumer;surplus would be.;14.;award:5 out of;10.00 points;Question and Exercise 7-21;The general rule of political economy is;Give an example from the real world.

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