The above figure shows the demand and supply curves in the market for milk. Currently the market is in equilibrium. If the government establishes a $4 per gallon price support, estimate the change in p, Q, and social welfare
What will be an ideal response?
Price rises to $4 per gallon. Consumers purchase only 500 gallons of milk. The government purchases 1,000 gallons of milk to support the price at $4. Thus a total of 1,500 gallons is produced. The loss in social welfare equals 1,000 gallons of milk at $4/gallon (equals $4,000 ) less the producer surplus above the old demand curve up to a price of $4 (which is $500 ). The loss in social welfare is $3,500.
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A local pizzeria charges $10 for a pizza. The owner of the pizzeria wants to increase the company's total revenue. A recent market research shows that the price elasticity of demand for his pizza is about 1.5
Should the pizzeria lower or raise the price? Explain your answer.
Which of the following pairs of goods is LEAST likely to be a pair of complements?
A) gasoline and vehicles B) coffee and sugar C) beer and wine D) razors and razor blades
Which of the following has not been outsourced from the U.S.?
a. customer service centers b. data processing c. residential construction d. computer programming
In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. The vertical intercept of the expenditure line is:
A. 990. B. 890. C. 900. D. 940.