--%>
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 : Introduction of the term Operating

    Give a brief introduction of the term Operating Leverage?

    		•
  • Q : Demand forecasting consumer's interview

    consumer's interview method for demand forecasting(point to point explain)

    		•
  • Q : Comparative advantage in production I

    I have a problem in economics on Comparative advantage in production. Please help me in the following question. The oranges are grown in Florida and potatoes are grown in Maine mainly since: (i) orange-grower’s in Maine have not lobbied effectiv

    		•
  • Q : Why is speculation unlike arbitrage

    Speculation is unlike arbitrage since: (1) speculative buyers always break even. (2) speculation causes increased costs. (3) speculators bear no risk. (4) positive returns for speculators are not sure. (5) competitive speculation equa

    		•
  • Q : Growth is a significant economic goal.

    Growth is a significant economic goal. Explain?

    		•
  • Q : U.S. exports create a demand for

    True or false? “U.S. exports create a demand for foreign currencies; foreign imports of U.S. goods generate supplies of foreign currencies.”  Explain.

    		•
  • Q : Problem on productive contribution

    Suppositions underpinning simple production possibilities frontier models don’t comprise a need that: (i) Net resources are fixed. (ii) All resources are efficiently employed. (iii) Technology is steady. (iv) Resource owners are paid according t

    		•
  • Q : Cchange in demand and a change in the

    Distinguish between a change in demand and a change in the quantity demanded?

    		•
  • Q : Concepts of Economic system argues by

    For Economic system argues by Adam Smith relies heavily upon all the given concepts EXCEPT: (w) market expansion will be facilitated through capital accumulation. (x) prices will be driven to the lowest point at that production can ev

    		•
  • Q : Single seller not sell at a price lower

    An individual seller within perfect competition will not sell at a price lower than the market price since: w) demand for the product will exceed supply.  x) the seller would begin a price war. y) the seller can sell any quantity she desires at the prevailing mar

    		•