I NEED DETAILED EXPLANATIONS WITH FOR THE FOLLOWING QUESTIONS. 45) The market de
ID: 1195259 • Letter: I
Question
I NEED DETAILED EXPLANATIONS WITH FOR THE FOLLOWING QUESTIONS.
45) The market demand curve for a popular teen magazine is given by Q = 80 - 10P where P is the magazine price in dollars per issue and Q is the weekly magazine circulation in units of 10,000. If the circulation is 400,000 per week at the current price, what is the consumer surplus for a teen reader with maximum willingness to pay of $3 per issue?
A) $2.00
B) $1.00
C) Zero
D) -$1.00
Answer: D
11) The market supply curve for music downloads is Q = 135(P-1) where Q is millions of downloads and P is the price in dollars per track. If the current price is $1.20 per download, what is the change in producer surplus if the price increases by $0.20 per track?
A) $5.4 million
B) $8.1 million
C) $10.8 million
D) $27 million
1) Suppose the market in Figure 9.4 is currently in equilibrium. If the government establishes a price floor of $50, how many widgets will be sold?
A) 20
B) 30
C) 40
D) 50
E) 60
Answer: A
2) Suppose the market in Figure 9.4 is currently in equilibrium. If the government establishes a price floor of $40, consumer surplus will
A) fall by $50.
B) fall by $350.
C) remain the same.
D) rise by $50.
E) rise by $350.
Answer: B
3) Refer to Figure 9.4. If the government establishes a price floor of $40 and government purchases the surplus over quantity demanded, producer surplus will
A) fall by $275.
B) fall by $500.
C) remain the same.
D) rise by $275.
E) rise by $500.
Answer: E
4) Refer to Figure 9.4. If the government establishes a price floor of $40 and government purchases the surplus over quantity demanded, the resulting deadweight loss will be
A) $15.
B) 10 widgets.
C) $1,050.
D) $1,200.
E) $2,400.
Answer: C
5) Refer to Figure 9.4. If the government establishes a price floor of $40 and purchases the surplus, total consumer and producer surplus will be
A) $15.
B) 30 widgets.
C) $1,050.
D) $1,200.
E) $1,350
Answer: E
Explanation / Answer
Question 45
Market demand curve is as follows -
Q = 80 - 10P
Q is the weekly magazine circulation in units of 10,000.
Weekly circulation is 400,000 magazines per week.
So,
Q = 400,000/10,000 = 40
Q = 80 - 10P
40 = 80 - 10P
40 - 80 = -10P
10P = 40
P = 4
The price of magazine is $4 per issue.
Maximum willingness to pay of teen reader is $3 per issue.
It can be seen that maximum willingness to pay of teen reader is lower than the price of magazine.
In such case, teen reader will not by the magazine.
As teen reader will not buy the maazine, he will not get any consumer surplus.
So, consumer surplus would be zero.
Hence, the correct answer is the option (c).
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