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Economics
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13 Dec 2019

One of the following would not to lead to a deadweight loss.Which one?

a. A tax imposed on sellers when demand is downward sloping andsupply is perfectly elastic

b. A price ceiling that is set below the equilibrium price

c. A subsidy paid to sellers when both demand and supply areelastic, but not infinite

d. A tax imposed on sellers when demand is perfectlyinelastic

e. All the above will result to a deadweight loss

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Nelly Stracke
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17 Dec 2019
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Related questions

A) Let the demand for Hyannis lobster be given by P=22-Q (where P is the price in dollars and Q is thousands of lobsters). Let supply be given by P=Q. What is the equilibrium price, consumer surplus, and producer surplus?

B) Introduce a $3 tax to the lobster market. What happens to the equilibrium price if a $3 tax is imposed on sellers? What happens to consumer and producer surplus? What is the amount collected in taxes?

C) After the $3 tax, is there a deadweight loss? What is it?

Suppose that a market is described by the following supply and demand equations:

QS= 2P

QD = 300P

a. Solve for the equilibrium price and the equilibrium quantity.

b. Suppose that a tax of T is placed on buyers so the new demand equation is QD = 300 (PT). Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold?

c. Tax revenue is T×Q. Use your answer to part (b) to solve for tax revenue as a function of T. 
d. The deadweight loss of a tax is the area of the triangle between the supply and demand curves. Recalling that the area of a triangle is , solve for deadweight loss as a function of T. 

(Hint: Looking sideways, the base of the deadweight loss triangle is T, and the height is the difference between the quantity sold with the tax and the quantity sold without the tax.)

 

1- When a price ceiling is imposed, long lines are likely to follow. The value of the time wasted waiting in these lines should be equal to the difference between the market equilibrium price and the imposed price ceiling.

Suppose that demand for a good is given by Q = 122 - 3P, while supply for the good is given by Q = 1P - 20. The average person values their time at $12.29/hour. If a price ceiling of $11.04 is imposed, how many hours will the average person have to wait in line?

2- Suppose that demand for a good is given by Q = 132 - 3P, while supply for the good is given by Q = 2P - 5. If a price ceiling of $11.96 is imposed, what will be the area of the deadweight loss?

3-

The unemployment rate is the percentage of workers who are seeking a job at the prevailing wage, but who are unable to get one. When a minimum wage is imposed, it creates some unemployment among minimum wage workers.

Suppose that the demand for labor is given by Q = 56 - 1W, where 'W' is the hourly wage rate, and the supply of labor is given by Q = 5W - 5. Imagine that a minimum wage of $22.68/hour is imposed by law.

What will be the unemployment rate for workers in this market?

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