--%>

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 : Economic Why are democratic regimes

    Why are democratic regimes more conducive to economic growth than dictatorship

  • Q : Exchange is the necessary consequence

    Explain: “Exchange is the necessary consequence of specialization.”

  • Q : Describe Traditional approach of

    Briefly describe Traditional approach of capital structure?

  • Q : Public Sector Government Role

    Illustrate the Public Sector Government’s Role of providing the legal structure?

  • Q : Define the ability of goods by wealth

    According to Adam Smith nation's wealth is, not the gold this possesses, but somewhat it’s: (1) number of people. (2) capability to give goods for its people. (3) foreign investments. (4) domestic financial capital. (5) militar

  • Q : Illustrate Other Things Equal revisited

    Illustrate “Other Things Equal” Revisited in Supply and Demand, and Equilibrium?

  • Q : Explain about the principle of

    Economic efficiency needs that, relative to the other goods which different individuals might consume, the people who value exact goods relatively the most should own and/or use all goods. Such principle is termed as: (i) economic equity. (ii) allocat

  • Q : Calculate the short-run profit or loss

    A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The cost of each good is $10. Calculate the firm's short-run profit or loss. w) loss of $6,000. x) profit of $6,000. y profit of $30,000. z) There is insufficient

  • Q : Way to determine nature price of Adam

    “Natural price” by Adam Smith of a good was eventually determined through: (1) the amount of capital used within production in the short run. (2) long-run average costs of production, that Adam Smith believed to be the amo

  • Q : Fruit Question: Read the following

    Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

    Discover Q & A

    Leading Solution Library
    Avail More Than 1433335 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads
    No hassle, Instant Access
    Start Discovering

    18,76,764

    1933933
    Asked

    3,689

    Active Tutors

    1433335

    Questions
    Answered

    Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

    Submit Assignment

    ©TutorsGlobe All rights reserved 2022-2023.