ECON 213 Problem Set ch. 5 Liberty University Solution

A college student enjoys drinking hand-crafted ginger beer. Her willingness to pay for each bottle is shown in the following table.

If a bottle of hand-crafted ginger beer costs $4, how many bottles will the student buy?

How much consumer surplus will she enjoy? Assume that the student will purchase bottles up to, but not including, the point at which she incurs a loss of consumer surplus.

If the price of a bottle falls to $3, how many bottles of hand-crafted ginger beer will she buy?

How much consumer surplus will she enjoy? Assume that the student will purchase bottles up to, but not including, the point at which she incurs a loss of consumer surplus.

The table below shows the highest price that Peter, Paul, and Mary are willing to pay to see the popular Broadway musical Cats. How much is their total consumer surplus if the current ticket price is $525?

Marcus paid $40 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Marcus’s friend Starling learns that Marcus bought a potato cannon, he asks Marcus if he will sell it for $65, and Marcus agrees. Starling is thrilled, because he would have paid Marcus up to $80 for the cannon. Marcus is also delighted. Determine the consumer surplus from the original purchase and the additional surplus generated by the resale of the cannon.

You are thinking about renting a room in a house next year with three of your friends. For each month’s rent, you are willing to pay $580, your first friend is willing to pay $550, your second friend is willing to pay $560, and your third friend is willing to pay $610. The landlord agrees to offer each of you separate leases but will charge you all the same price: $550. You decide this is a good deal, so you and your friends move in. A couple of months later, you learn from someone who knows the landlord that he would have been willing to rent each room for $500 per month.

A tax on a good with perfectly inelastic demand causes the price to rise and the supply to shift from S1 to S2, as shown. Use the area tool to draw the area representing the producer surplus after the tax. Your answer should be a triangle with three corners.

The graph shows the supply and demand curves for quarter-gallon cans of latex paint. Use the area tool to outline the three-cornered region that represents the consumer

What is the total consumer surplus (in dollars)?

A tax on a good with perfectly inelastic demand causes the price to rise and the supply to shift from S1 to S2, as shown. Use the area tool to draw the area representing the government's tax revenue. Your answer should be a rectangle with four corners.

What portion of this tax will be paid by consumers and what portion by producers?

The figure below shows the effect of a $5 tax paid by the seller. Use the information in the figure to answer the questions that follow.

As a result of the tax, consumer surplus falls by $

As a result of the tax, producer surplus falls by $

If the government wants to raise tax revenue, which of the following items are good candidates for an excise tax?

Choose one or more: