Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 12.2, Problem 2QQ
To determine
The concept of an efficient tax system and the reason that makes a tax system inefficient.
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Janice is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for a third, and $30 for a fourth. If shoes cost $50, Janice will buy _____ pairs of shoes and her total consumer surplus will equal _______.
The rent on an apartment in a particular building near campus is $1,200 per month. If Min would be willing to pay up to $1,400, Genevieve would be willing to pay up to $1,500, Fraser would be willing to pay up to $1,600, and Kayden would pay no more than $1,000, what is the consumer surplus for this group of students who would like to live in the building? Explain how you calculated this consumer surplus
Suppose that Ty, George, Joe, and Ted are potential buyers of a rare Honus Wagner baseball
card. Each will buy either one card or zero cards. Ty's benefit from owning the card is $500,000;
George's benefit is $400,000; Joe's benefit is $300,000; and Ted's benefit is $200,000. What is
total consumer surplus if the price of a Honus Wagner card is $250,000?
$450,000
$350,000
$250,000
$150,000
Chapter 12 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Question 39 You are considering buying a monthly metro pass for the subway at $100 or paying $4 per ride (Pd). Your monthly demand curve is Pd = 60-2Qd where Qd is the number of rides per month. Given this information, your consumer surplus will be $784 buying each ride and $800 with the monthly pass. $600 buying each ride and $700 with the monthly pass. $784 buying each ride and $750 with the monthly pass. $750 buying each ride and $900 with the monthly pass.arrow_forwardAdam is willing to buy a bottle of water at the price of $2/bottle. Bryan is willing to buy three bottles of water at the price of $1.5/bottle. Cathy is willing to buy two bottles of water at the price of $1.75/bottle. The market price is $1.75/bottle. What is the consumer surplus? $0.25 O $0.15 O $1.75 O $2arrow_forwardThere are four consumers willing to pay the following amounts for haircuts: A: $7 В: $2 С: $8 and D: $5 There are four haircutting businesses with the following costs; Firm 1: $3 Firm 2: $6 Firm 3: $4 and Firm 4: $2 Each firm has the capacity to produce only one haircut. For efficiency how many haircuts can be given? Also find out how large will be the total surplus.arrow_forward
- Figure 8-10 РО P1 P2 P3 P4 PS P6 P7 P8 P9 0 Price Q1 Q2 Q3 Q4 Q5 (PO-P2) x Q2. ½ x (PO-P5) x Q5. Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the consumer surplus is (PO-P5) x Q5. Supply ½ x (PO-P2) x Q2. Demand Quantityarrow_forwardYou are Brandon Johnson. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3…arrow_forwardTable 7-1 Buyer Willingness To Pay Calvin $150.00 Sam $135.00 Andrew $120.00 Lori $100.00 Refer to Table 7-1. If the market price is $105, ☐ Calvin's consumer surplus is $45 and total consumer surplus is $85. Sam's consumer surplus is $30 and total consumer surplus is $90. ☐ Andrew's consumer surplus is $15 and total consumer surplus is $67.50. Lori's consumer surplus is -$2 and total consumer surplus is $100.arrow_forward
- Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Jeff and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. How much is total consumer surplus in this market? A) $5.25 OB) $2.25 OC) $0.75 OD) $3.00arrow_forwardYou are Lori Lightfoot. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 4.00 1.1 1.75 3.50 1.2 1.50 10 3.00 1.3 Answer the following questions 1. Are the 2 demand curves straight lines? Is the elasticity constant on each curve at each price? If so, what is it? If not, what is it? 2. Is one strategy better than the other (just from a money perspective)? Why? Does it depend on where the tax/fare is instituted? 3. From what you know of elasticity and the real world, is raising the price the best policy? Given your answer, do all consumers share equally in the tax? Your answers should be complete enough to answer each question.arrow_forwardNeha buys an iPhone for $240 and gets a consumer surplus of $160. Her willingness to pay for an iPhone is . If she had bought the iPhone on sale for $180, her consumer surplus would have been . If the price of the iPhone had been $500, her consumer surplus would have beenarrow_forward
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