ECON 101 Study Guide - Midterm Guide: Price Ceiling, Economic Equilibrium, Economic Surplus

The diagram below shows supply, demand, and quantity exchanged of Monday matinee movie tickets. Assume it is a perfectly competitive market. Price ($) 10 20 30 40 50 60 70 80 90 100 Quantity FIGURE 12-4 22) Refer to Figure 12-4. What is the value of the producer surplus generated in this market at the free-market equilibrium? A) $0 B) $5 C) $10 D) $125 E) $250

Use the accompanying graph to answer these questions. (LO2, LO3, LO4) a. Suppose demand is D and supply is S0. If a price ceiling of $6 is imposed, what are the resulting shortage and full economic price? b. Suppose demand is D and supply is S0. If a price support of $12 is imposed, what is the resulting surplus? What is the cost to the government of purchasing any and all unsold units? c. Suppose demand is D and supply is S0 so that the equilibrium price is $10. If an excise tax of $6 is imposed on this product, what happens to the equilibrium price paid by consumers? The price received by producers? The number of units sold? d. Calculate the level of consumer and producer surplus when demand and supply are given by D and S0 respectively. e. Suppose demand is D and supply is S0. Would a price ceiling of $2 benefit any consumers? Explain.

Price CSO 01 02 03 04 Quantity 27. Refer to figure F998. If the market in this figure is in equilibrium at P Q. and the demand curve shifts to Do what will happen if the government imposes a price ceiling at Pı? a. There will be an increase in supply to regain equilibrium b. A surplus of the amount D-A will occur. C. A shortage of the amount Q3 - Q1 will occur. d There will be Qi units actually bought. e. Both c and d.