How much total economic surplus would have been lost if the bread subsidy, as illustrated in Example 7.7, had been set at $0.50 per loaf instead of $1.00?
Answer:
With a $0.50-per-loaf subsidy, the new domestic price becomes $1.50 per loaf. The new lost surplus is the area of the small shaded triangle in the diagram: (1/2)($0.50/loaf)(1,000,000 loaves/month) = $250,000 per month. (LO5)
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The concept of utility is
A. subjective so that there can be no true measurement of someone's utility. B. subjective so measurement of someone's utility must be done scientifically. C. objective so that psychologists can measure utility and compare one person's utility with that of another person. D. objective so that devices can be developed that would measure a person's utility.
The demand for a monopoly's output is p = 200 - Q. The monopoly's production function is Q = 2L, and the market wage is $4. How many units of labor will the monopolist employ at its profit maximization level of output?
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