The above figure shows supply and demand curves for milk. In an ...

[newyorker26]

The above figure shows supply and demand curves for milk. If the government limits milk production to Q2, the loss in social welfare will equal
◦ f + g.
◦ b + f.
◦ c + g.
◦ b + c + f + g.

[yasmin]

f + g.

[lunatika]

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.

[missalyssa26]

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. The decrease in consumer surplus is (500 + 1000) ∗ 1/2 = $750, and the decrease in producer surplus is (500 + 1000) ∗ 1/2 = $750, and the tax revenue is 2 ∗ 500 = $1000. Therefore the change in social welfare is $1000 - $750 - $750 = $500.

[lunatika]

Excellent

[missalyssa26]

Great! Please up vote

[leo leo]

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, calculate the dead weight loss associated with the tax, and explain why the dead weight loss occurs.

[aprice35067]

The deadweight loss equals .5 ∗ 2 ∗ 500 ∗ $500. The deadweight loss occurs because the tax lowers the output from the competitive level. At the output level that occurs with the tax, consumers value the last unit of output by more than it costs to produce that unit.

[vinney12]

The above figure shows the demand and supply curves in the market for milk. Currently the market is in equilibrium. If the government establishes a $4 per gallon price support, estimate the change in p, Q, and social welfare.

[Chou]

Price rises to $4 per gallon. Consumers purchase only 500 gallons of milk. The government purchases 1,000 gallons of milk to support the price at $4. Thus, a total of 1,500 gallons is produced. The loss in social welfare equals 1,000 gallons of milk at $4/gallon (equals $4,000) less the producer surplus above the old demand curve up to a price of $4 (which is $500). The loss in social welfare is $3,500.