--%>
Assignment Help - homework help

Raising consumer surplus problem

For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gizmos. Consider the given programs of government intervention:

Program I: The govt. obliges an excise tax of $2 per gizmo
Program II: The govt. gives a subsidy of $2 per gizmo for gizmo producers.
Program III: The govt. obliges a price floor of $30.
Program IV: The govt. obliges a price ceiling of $20.
Program V: The govt. permits no more than 8,000 gizmos to be generated.

Which of such programs would surely lead to a raise in consumer surplus? State briefly.

E

Expert

Verified

Through excise tax (that is, Program I) the price consumers pay will increase, Therefore consumer surplus will surely go down.

Through subsidy (that is, Program II) the price consumers pay will drop, therefore consumer excess will surely increase.

Through price floor (that is, Program III) the price consumers pay will increase, therefore consumer excess will surely drop.

Through price ceiling (that is, Program III) the price consumers pay will drop, however thus will the quantity generated. Consumer surplus might go down. This can take place when the price floor is so low that very small units are generated (and therefore accessible for purchase by consumers).

With the production quota (that is, Program V) the price consumers pay will increase, therefore consumer surplus will surely drop.

   Related Questions in Business Economics

  • Q : Perfect competition leads the economic

    The perfectly competitive market structure benefits consumers since: w) firms do not generate goods at the lowest possible price within the long run. x) firms are forced through competitive pressure to be as efficient as possible. y) firms add a much

    		•
  • Q : Who define economics as a subset of

    Economists who viewed economics like a subset of jurisprudence combined: (1) John Stuart Mill. (2) Alfred Marshall. (3) Karl Marx. (4) William Stanley Jevons. (5) Adam Smith. Hey friends please give your opinion fo

    		•
  • Q : Describe the output effects of Inflation

    Describe the output effects of Inflation?

    		•
  • Q : Illustrates inverse relationship

    Illustrates the inverse relationship between price and quantity?

    		•
  • Q : Facts serve to sort out good and bad

    Explain the statement: “Facts serve to sort out good and bad hypotheses.”?

    		•
  • Q : The financial investor about bonds

    Describe three ways to finance corporate activity.  Make a case that stocks are more risky for the financial investor than are bonds?

    		•
  • Q : Characteristic of an oligopolistic

    Which of the given is a quality of an oligopolistic market structure? w) There are only some dominant sellers. x) every firm sells a unique product. y) this is easy for new firms to enter the industry. z) Each firm require not react to the actions of

    		•
  • Q : International trade to the U.S. economy

    How important is international trade to the U.S. economy?  In terms of volume, does the United States trade more with industrially advanced economies or with developing economies? What country is the United States’ most important trading partner, quantitati

    		•
  • Q : The market system not only accepts

    Explain the statements: The market system not only accepts self-interest as a fact of human existence.

    		•
  • Q : Heterodox perspective of business

    I am facing difficulty in this question. Help me in find out correct answer of this economy based question. From heterodox perspective, why do business enterprises choose administered prices as opposed to highly flexible prices?

    		•