The above figure shows the demand and supply curves in the market for milk. Currently the market is in equilibrium. If the government imposes a $2 per gallon tax to be collected from sellers, estimate the change in p, Q, and social welfare
What will be an ideal response?
The supply curve shifts vertically by $2. The price changes from $3 per gallon to $4 per gallon. Quantity falls from 1,000 gallons to 500 gallons. For the 500 gallons no longer produced, consumer surplus was $250 and producer surplus was $250. Producers and consumers also pay $1,000, but that represents a transfer to the government.
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Under perfect competition, if an industry is characterized by positive economic profits in the short run
a. firms will leave the market in the long run and the short-run supply curve will shift outward. b. firms will enter the market in the long run and the short-run supply curve will shift outward. c. firms will enter the market in the long run and the short-run supply curve will shift inward. d. firms will leave the market in the long run and the short-run supply curve will shift inward.
Say you had an 8 A.M. economics class, and you only come to campus to attend your economics class. The cost of coming to the economics class would then include: a. the value of the time it took to drive to campus. b. the cost of the gasoline it took to get to campus. c. the cost of insuring the car for that day
d. a. and b.