Suppose that Amber's demand for gasoline is given by G = 1000 - 200PG, where G stands for gallons of gas and PG represents the price of gas. (a) Suppose gas sells for $2 per gallon. What is Amber's consumer surplus? Illustrate your answer graphically. (b) Suppose the price of gas rises to $3 per gallon. What is the change in Amber's consumer surplus? Illustrate this change in your graph
What will be an ideal response?
(a) Amber's demand curve is shown in Figure 6.12. When gas sells for $2 per gallon, Amber's consumer surplus is (1/2) × $2 × 600 = $900. This is shown as the area of triangle $5$2a.
(b) When PG = $3, consumer surplus is (1/2) × $2 × 400 = $400. So Amber's consumer surplus falls by $500. This is represented by the area of the rectangle $3$2cb plus the area of the triangle abc in Figure 6.12.
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Some economists believe that inflation could actually help reduce unemployment in the short-run
a. True b. False Indicate whether the statement is true or false
Monetarists argue that business fluctuations are caused by
A. excessive government spending. B. ups and downs in the growth of the money supply. C. changes in tax rates. D. changes in transfer payments.
Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates aDrive-Through WindowQuick Burger Does NotOperate Drive-Through WindowQuick Burger$24,000$15,000The Sunshine Café$11,000$23,000If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-through window?
A. No, because it would lower the payoff for The Sunshine Café. B. Yes, because Quick Burger's payoff is higher when it operates a drive-through. C. No, because it is not socially efficient to operate a drive-through. D. It cannot be determined.
Outsourcing of services to foreign countries:
a. Cost the U.S. economy an estimated 5 million jobs by 2005. b. Mainly impacts workers in business services such as data entry and software development. c. Is a serious concern for workers in high-wage manufacturing industries. d. Will have a serious negative impact on all service sector jobs in the United States