微观经济学英文版9-14章自测题及答案

英文微观经济学试题及答案一、选择题（每题2分，共20分）1. Which of the following is not a characteristic of a perfectly competitive market?A. Many buyers and sellersB. Homogeneous productsC. Free entry and exitD. Monopoly powerAnswer: D2. The law of diminishing returns states that:A. The total product of labor increases as more labor is addedB. The marginal product of labor eventually decreases as more labor is addedC. The average product of labor is always higher than the marginal productD. The marginal product of labor is always higher than the average productAnswer: B3. In the short run, a firm in a perfectly competitive market will shut down if:A. Total revenue is greater than total variable costB. Total revenue is less than total costC. Total revenue is less than total variable costD. Total revenue is less than average total costAnswer: C4. The demand for a good is likely to be more elastic when:A. The good has many close substitutesB. The good is a luxury itemC. The good is a necessityD. The good represents a small proportion of consumer's incomeAnswer: A5. The consumer surplus is the difference between:A. The maximum price a consumer is willing to pay and the market priceB. The market price and the minimum price a consumer is willing to payC. The maximum price a consumer is willing to pay and the minimum price a consumer is willing to payD. The minimum price a consumer is willing to pay and the market priceAnswer: A...（此处省略其他选择题）二、简答题（每题10分，共30分）1. Explain the concept of price elasticity of demand and itsdeterminants.Answer: Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. The determinants of price elasticity include the availability of substitutes, the proportion of income spent on the good, the necessity of the good, and the time period over which the demand is being considered.2. What is the difference between a normal good and aninferior good?Answer: A normal good is a good for which the demand increases as income increases, while the demand for aninferior good decreases as income increases. This is because normal goods are typically considered desirable or of higher quality, while inferior goods are seen as lower quality substitutes that consumers prefer to avoid as their income increases.3. Define the law of supply and give an example.Answer: The law of supply states that, all else being equal, the quantity supplied of a good will increase as the price of the good increases, and decrease as the price of the good decreases. An example of this would be the supply of oil; if the price of oil rises, producers are more likely to increase production and supply more oil to the market.三、计算题（每题25分，共50分）1. A firm has the following total cost function: TC = 0.5Q^2 - 4Q + 100. Calculate the firm's average total cost (ATC) and marginal cost (MC) at the quantity level of Q = 50.Answer:To find the average total cost (ATC), we divide the total cost (TC) by the quantity (Q):\[ ATC = \frac{TC}{Q} = \frac{0.5Q^2 - 4Q + 100}{Q} \]At Q = 50:\[ ATC = \frac{0.5(50)^2 - 4(50) + 100}{50} = \frac{1250}{50} = 25 \]The marginal cost (MC) is the derivative of the total cost function with respect to quantity:\[ MC = \frac{dTC}{dQ} = 0.5 \times 2Q - 4 \]At Q = 50:\[ MC = 0.5 \times 2 \times 50 - 4 = 50 - 4 = 46 \]2. A monopolist faces the demand function P = 100 - 2Q and has a total cost function TC = 10Q. Calculate the profit-maximizing level of output and the corresponding price.Answer:First, calculate the marginal revenue (MR) by taking the derivative of the total revenue (TR) with respect to Q. TR is P*Q, so:\[ TR = (100 -。

曼昆微观经济学课后练习英文答案集团标准化办公室：[VV986T-J682P28-JP266L8-68PNN]the link between buyers’ willingness to pay for a good and the demandcurve.how to define and measure consumer surplus.the link between sellers’ costs of producing a good and the supply curve.how to define and measure producer surplus.that the equilibrium of supply and demand maximizes total surplus in amarket.CONTEXT AND PURPOSE:Chapter 7 is the first chapter in a three-chapter sequence on welfare economics and market efficiency. Chapter 7 employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 and 9 to determine the winners and losers from taxation and restrictions on international trade.The purpose of Chapter 7 is to develop welfare economics—the study of how the allocation of resources affects economic well-being. Chapters 4 through 6 employed supply and demand in a positive framework, which focused on the question, “What is the equilibrium price and quantity in a market” This chapter now addresses the normative question, “Is the equilibrium price and quantity in a market the best possible solution to the resource allocation problem, or is it simply the price and quantity that balance supply and demand” Students will discover that under most circumstances the equilibrium price and quantity is also the one that maximizes welfare.KEY POINTS:Consumer surplus equals buyers’ willingness to pay for a good minus the amount they actually pay for it, and it measures the benefit buyers get from participating in a market. Consumer surplus can be computed by finding the area below the demand curve and above the price.Producer surplus equals the amount sellers receive for their goods minus their costs of production, and it measures the benefit sellers get from participating in a market. Producer surplus can be computed by finding the area below the price and above the supply curve.An allocation of resources that maximizes the sum of consumer and producer surplus is said to be efficient. Policymakers are often concerned with the efficiency, as well as the equality, of economic outcomes.The equilibrium of supply and demand maximizes the sum of consumer andproducer surplus. That is, the invisible hand of the marketplace leadsbuyers and sellers to allocate resources efficiently.Markets do not allocate resources efficiently in the presence of market failures such as market power or externalities.CHAPTER OUTLINE:I. Definition of welfare economics: the study of how the allocation of resources affects economic well-being.A. Willingness to Pay1. Definition of willingness to pay: the maximum amount that a buyer will pay for a good.2. Example: You are auctioning a mint-condition recording of Elvis Presley’s first album. Four buyers show up. Their willingness to pay is as follows:If the bidding goes to slightly higher than $80, all buyersdrop out except for John. Because John is willing to paymore than he has to for the album, he derives some benefitfrom participating in the market.3. Definition of consumer surplus: the amount a buyer is willing to payfor a good minus the amount the buyer actually pays for it.4. Note that if you had more than one copy of the album, the price in the auction would end up being lower (a little over $70 in the case of two albums) and both John and Paul would gain consumer surplus.B. Using the Demand Curve to Measure Consumer Surplus1. We can use the information on willingness to pay to derive a demandmarginal buyer . Because the demand curve shows the buyers’ willingness to pay, we can use the demand curve to measure c onsumer surplus.C. How a Lower Price Raises Consumer Surplussurplus because they are paying less for the product than before (area A on the graph).b. Because the price is now lower, some new buyers will enter the market and receive consumer surplus on these additional units of output purchased (area B on the graph).D. What Does Consumer Surplus Measure?1. Remember that consumer surplus is the difference between the amount that buyers are willing to pay for a good and the price that they actually pay.2. Thus, it measures the benefit that consumers receive from the good as the buyers themselves perceive it.III. Producer SurplusA. Cost and the Willingness to Sell1. Definition of cost: the value of everything a seller must give up to produce a good .2. Example: You want to hire someone to paint your house. You accept bidsfor the work from four sellers. Each painter is willing to work if the priceyou will pay exceeds her opportunity cost. (Note that this opportunity costthus represents willingness to sell.) The costs are:sellers will drop out except for Grandma. Because Grandma receives more than she would require to paint the house, she derives some benefit from producing in the market.4. Definition of producer surplus: the amount a seller is paid for a good minus the seller’s cost of providing it.5. Note that if you had more than one house to paint, the price in the auction would end up being higher (a little under $800 in the case of two houses) and both Grandma and Georgia would gain producer surplus.ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price ceilings from Chapter 6. Redraw themarket for two-bedroom apartments in your town. Draw in a priceceiling below the equilibrium price.Then go through:consumer surplus before the price ceiling is put into place. consumer surplus after the price ceiling is put into place. You will need to take some time to explain the relationship between the producers’ willingness to sell and the cost of producing the good. The relationship between cost and the supply curve is not as apparent as the relationship between the It is important to stress that consumer surplus is measured inmonetary terms. Consumer surplus gives us a way to place amonetary cost on inefficient market outcomes (due to governmentB. Using the Supply Curve to Measure Producer Surplus1. We can use the information on cost (willingness to sell) to derive a2.the cost of the marginal seller. Because the supply curve shows the sellers’ cost (willingness to sell), we can use the supply curve to measure producer surplus.C. How a Higher Price Raises Producer Surplussurplus because they are receiving more for the product than before (area C on the graph).b. Because the price is now higher, some new sellers will enter the market and receive producer surplus on these additional units of output sold (area D on the graph).D. Producer surplus is used to measure the economic well-being of producers,ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price floors from Chapter 6. Redraw the marketfor an agricultural product such as corn. Draw in a price supportabove the equilibrium price.Then go through:producer surplus before the price support is put in place.producer surplus after the price support is put in place.Make sure that you discuss the cost of the price support tomuch like consumer surplus is used to measure the economic well-being of consumers.IV. Market EfficiencyA. The Benevolent Social Planner1. The economic well-being of everyone in society can be measured by total surplus, which is the sum of consumer surplus and producer surplus:Total Surplus = Consumer Surplus + Producer SurplusTotal Surplus = (Value to Buyers – Amount Paid byBuyers) +(Amount Received by Sellers – Cost to Sellers)Because the Amount Paid by Buyers = Amount Received bySellers:2. Definition of efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society .3. Definition of equality: the property of distributing economicprosperity uniformly the members of society .a. Buyers who value the product more than the equilibrium price will purchase the product; those who do not, will not purchase the product. Inother words, the free market allocates the supply of a good to the buyers who value it most highly, as measured by their willingness to pay.b. Sellers whose costs are lower than the equilibrium price will produce the product; those whose costs are higher, will not produce the product. Inother words, the free market allocates the demand for goods to the sellers who can produce it at the lowest cost.value of the product to the marginal buyer is greater than the cost to the marginal seller so total surplus would rise if output increases.Pretty Woman, Chapter 6. Vivien (Julia Roberts) and Edward(Richard Gere) negotiate a price. Afterward, Vivien reveals shewould have accepted a lower price, while Edward admits he wouldhave paid more. If you have done a good job of introducingconsumer and producer surplus, you will see the light bulbs gob. At any quantity of output greater than the equilibrium quantity, the value of the product to the marginal buyer is less than the cost to the marginal seller so total surplus would rise if output decreases.3. Note that this is one of the reasons that economists believe Principle #6: Markets are usually a good way to organize economic activity.C. In the News: Ticket Scalping1. Ticket scalping is an example of how markets work to achieve anefficient outcome.2. This article from The Boston Globe describes economist Chip Case’sexperience with ticket scalping.D. Case Study: Should There Be a Market in Organs?1. As a matter of public policy, people are not allowed to sell their organs.a. In essence, this means that there is a price ceiling on organs of $0.b. This has led to a shortage of organs.2. The creation of a market for organs would lead to a more efficientallocation of resources, but critics worry about the equity of a market system for organs.V. Market Efficiency and Market FailureA. To conclude that markets are efficient, we made several assumptions about how markets worked.1. Perfectly competitive markets.2. No externalities.B. When these assumptions do not hold, the market equilibrium may not be efficient.C. When markets fail, public policy can potentially remedy the situation. SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. Figure 1 shows the demand curve for turkey. The price of turkey is P 1and the consumer surplus that results from that price is denoted CS. Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. It measures the benefit to buyers ofparticipating in a market.Figure 1 Figure 22. Figure 2 shows the supply curve for turkey. The price of turkey is P 1and the producer surplus that results from that price is denoted PS. Producer surplus is the amount sellers are paid for a good minus the sellers’ cost of providing it (measured by the supply curve). It measures the benefit to sellers of participating in a market.It would be a good idea to remind students that there are circumstances when the market process does not lead to the most efficient outcome. Examples include situations such as when a firm (or buyer) has market power over price or when there areFigure 33. Figure 3 shows the supply and demand for turkey. The price of turkey is P, consumer surplus is CS, and producer surplus is PS. Producing more turkeys 1than the equilibrium quantity would lower total surplus because the value to the marginal buyer would be lower than the cost to the marginal seller on those additional units.Questions for Review1. The price a buyer is willing to pay, consumer surplus, and the demand curve are all closely related. The height of the demand curve represents the willingness to pay of the buyers. Consumer surplus is the area below the demand curve and above the price, which equals the price that each buyer is willing to pay minus the price actually paid.2. Sellers' costs, producer surplus, and the supply curve are all closely related. The height of the supply curve represents the costs of the sellers. Producer surplus is the area below the price and above the supply curve, which equals the price received minus each seller's costs of producing the good.Figure 43. Figure 4 shows producer and consumer surplus in a supply-and-demand diagram.4. An allocation of resources is efficient if it maximizes total surplus, the sum of consumer surplus and producer surplus. But efficiency may not be the only goal of economic policymakers; they may also be concerned about equitythe fairness of the distribution of well-being.5. The invisible hand of the marketplace guides the self-interest of buyers and sellers into promoting general economic well-being. Despite decentralized decision making and self-interested decision makers, free markets often lead to an efficient outcome.6. Two types of market failure are market power and externalities. Market power may cause market outcomes to be inefficient because firms may cause price and quantity to differ from the levels they would be under perfect competition, which keeps total surplus from being maximized. Externalities are side effects that are not taken into account by buyers and sellers. As a result, the free market does not maximize total surplus.Problems and Applications1. a. Consumer surplus is equal to willingness to pay minus the price paid. Therefore, Melissa’s willingness to pay must be $200 ($120 + $80).b. Her consumer surplus at a price of $90 would be $200 $90 = $110.c. If the price of an iPod was $250, Melissa would not have purchased one because the price is greater than her willingness to pay. Therefore, she would receive no consumer surplus.2. If an early freeze in California sours the lemon crop, the supply curve for lemons shifts to the left, as shown in Figure 5. The result is a rise in the price of lemons and a decline in consumer surplus from A + B + C to just A. So consumer surplus declines by the amount B + C.Figure 5 Figure 6In the market for lemonade, the higher cost of lemons reduces the supply of lemonade, as shown in Figure 6. The result is a rise in the price of lemonade and a decline in consumer surplus from D + E + F to just D, a loss of E + F. Note that an event that affects consumer surplus in one market oftenhas effects on consumer surplus in other markets.3. A rise in the demand for French bread leads to an increase in producer surplus in the market for French bread, as shown in Figure 7. The shift of the demand curve leads to an increased price, which increases producer surplusfrom area A to area A + B + C.Figure 7The increased quantity of French bread being sold increases the demandfor flour, as shown in Figure 8. As a result, the price of flour rises, increasing producer surplus from area D to D + E + F. Note that an event that affects producer surplus in one market leads to effects on producer surplus in related markets.Figure 84. a.Figure 9b. When the price of a bottle of water is $4, Bert buys two bottles of water. His consumer surplus is shown as area A in the figure. He values hisfirst bottle of water at $7, but pays only $4 for it, so has consumer surplus of $3. He values his second bottle of water at $5, but pays only $4 for it, so has consumer surplus of $1. Thus Bert’s total consumer surplus is $3 + $1 = $4, which is the area of A in the figure.c. When the price of a bottle of water falls from $4 to $2, Bert buys three bottles of water, an increase of one. His consumer surplus consists of both areas A and B in the figure, an increase in the amount of area B. He gets consumer surplus of $5 from the first bottle ($7 value minus $2 price), $3from the second bottle ($5 value minus $2 price), and $1 from the third bottle ($3 value minus $2 price), for a total consumer surplus of $9. Thus consumer surplus rises by $5 (which is the size of area B) when the price of a bottle of water falls from $4 to $2.5. a.Figure 10b. When the price of a bottle of water is $4, Ernie sells two bottles of water. His producer surplus is shown as area A in the figure. He receives $4 for his first bottle of water, but it costs only $1 to produce, so Ernie has producer surplus of $3. He also receives $4 for his second bottle of water, which costs $3 to produce, so he has producer surplus of $1. Thus Ernie’s total producer surplus is $3 + $1 = $4, which is the area of A in the figure.c. When the price of a bottle of water rises from $4 to $6, Ernie sells three bottles of water, an increase of one. His producer surplus consists of both areas A and B in the figure, an increase by the amount of area B. He gets producer surplus of $5 from the first bottle ($6 price minus $1 cost), $3 from the second bottle ($6 price minus $3 cost), and $1 from the third bottle ($6 price minus $5 price), for a total producer surplus of $9. Thus producer surplus rises by $5 (which is the size of area B) when the price of a bottle of water rises from $4 to $6.6. a. From Ernie’s supply schedule and Bert’s demand schedule, thean equilibrium quantity of two.b. At a price of $4, consumer surplus is $4 and producer surplus is $4, as shown in Problems 3 and 4 above. Total surplus is $4 + $4 = $8.c. If Ernie produced one less bottle, his producer surplus would decline to $3, as shown in Problem 4 above. If Bert consumed one less bottle, hisconsumer surplus would decline to $3, as shown in Problem 3 above. So total surplus would decline to $3 + $3 = $6.d. If Ernie produced one additional bottle of water, his cost would be $5, but the price is only $4, so his producer surplus would decline by $1. If Bert consumed one additional bottle of water, his value would be $3, but the price is $4, so his consumer surplus would decline by $1. So total surplus declines by $1 + $1 = $2.7. a. The effect of falling production costs in the market for stereos results in a shift to the right in the supply curve, as shown in Figure 11. As a result, the equilibrium price of stereos declines and the equilibriumquantity increases.Figure 11b. The decline in the price of stereos increases consumer surplus from area A to A + B + C + D, an increase in the amount B + C + D. Prior to the shift in supply, producer surplus was areas B + E (the area above the supply curve and below the price). After the shift in supply, producer surplus is areas E + F + G. So producer surplus changes by the amount F + G – B, which may be positive or negative. The increase in quantity increases producer surplus, while the decline in the price reduces producer surplus. Because consumer surplus rises by B + C + D and producer surplus rises by F + G – B, total surplus rises by C + D + F + G.c. If the supply of stereos is very elastic, then the shift of the supply curve benefits consumers most. To take the most dramatic case, suppose the supply curve were horizontal, as shown in Figure 12. Then there is no producer surplus at all. Consumers capture all the benefits of falling production costs, with consumer surplus rising from area A to area A + B.Figure 128. Figure 13 shows supply and demand curves for haircuts. Supply equals demand at a quantity of three haircuts and a price between $4 and $5. Firms A, C, and D should cut the hair of Ellen, Jerry, and Phil. Oprah’s willingnessto pay is too low and firm B’s costs are too high, so they do not participate. The maximum total surplus is the area between the demand and supply curves, which totals $11 ($8 value minus $2 cost for the first haircut, plus $7 value minus $3 cost for the second, plus $5 value minus $4 cost for the third).Figure 139. a. The effect of falling production costs in the market for computers results in a shift to the right in the supply curve, as shown in Figure 14. As a result, the equilibrium price of computers declines and the equilibrium quantity increases. The decline in the price of computers increases consumer surplus from area A to A + B + C + D, an increase in the amount B + C + D.Figure 14 Figure 15Prior to the shift in supply, producer surplus was areas B + E(the area above the supply curve and below the price). After theshift in supply, producer surplus is areas E + F + G. So producersurplus changes by the amount F + G – B, which may be positive ornegative. The increase in quantity increases producer surplus,while the decline in the price reduces producer surplus. Becauseconsumer surplus rises by B + C + D and producer surplus rises byF +G – B, total surplus rises by C + D + F + G.b. Because typewriters are substitutes for computers, the decline in the price of computers means that people substitute computers for typewriters, shifting the demand for typewriters to the left, as shown in Figure 15. The result is a decline in both the equilibrium price and equilibrium quantity of typewriters. Consumer surplus in the typewriter market changes from area A + B to A + C, a net change of C – B. Producer surplus changes from area C + D + E to area E, a net loss of C + D. Typewriter producers are sad about technological advances in computers because their producer surplus declines.c. Because software and computers are complements, the decline in the price and increase in the quantity of computers means that the demand for software increases, shifting the demand for software to the right, as shown in Figure 16. The result is an increase in both the price and quantity of software. Consumer surplus in the software market changes from B + C to A + B, a net change of A – C. Producer surplus changes from E to C + D + E, an increase of C + D, so software producers should be happy about the technological progress in computers.Figure 16d. Yes, this analysis helps explain why Bill Gates is one the world’s richest people, because his company produces a lot of software that is a complement with computers and there has been tremendous technological advance in computers.10. a. With Provider A, the cost of an extra minute is $0. WithProvider B, the cost of an extra minute is $1.b. With Provider A, my friend will purchase 150 minutes [= 150 –(50)(0)]. With Provider B, my friend would purchase 100 minutes [=150 – (50)(1)].c. With Provider A, he would pay $120. The cost would be $100 with Provider B.Figure 17d. Figure 17 shows the friend’s demand. With Provider A, he buys 150minutes and his consumer surplus is equal to (1/2)(3)(150) – 120= 105. With Provider B, his consumer surplus is equal to(1/2)(2)(100) = 100.e. I would recommend Provider A because he receives greater consumer surplus.11. a. Figure 18 illustrates the demand for medical care. If each procedure has a price of $100, quantity demanded will be Q1 procedures.Figure 18b. If consumers pay only $20 per procedure, the quantity demanded will be Qprocedures. Because the cost to society is $100, the number of procedures 2performed is too large to maximize total surplus. The quantity that maximizes total surplus is Q1 procedures, which is less than Q2.c. The use of medical care is excessive in the sense that consumers get procedures whose value is less than the cost of producing them. As a result, the economy’s total surplus is reduced.d. To prevent this excessive use, the consumer must bear the marginal cost of the procedure. But this would require eliminating insurance. Another possibility would be that the insurance company, which pays most of the marginal cost of the procedure ($80, in this case) could decide whether the procedure should be performed. But the insurance company does not get the benefits of the procedure, so its decisions may not reflect the value to the consumer.。

Chapter 01Thinking Like an Economist Multiple Choice Questions1. Economics is best defined as the study of:A. prices and quantities.B. inflation and interest rates.C. how people make choices under the conditions of scarcity and the results of those choices.D. wages and incomes.2. Economic questions always deal with:A. financial matters.B. political matters.C. insufficient resources.D. choice in the face of limited resources.3. The range of topics or issues that fit within the definition of economics is:A. limited to market activities, e.g., buying soap.B. limited to individuals and firms.C. extremely wide, requiring only the ideas of choice and scarcity.D. very limited.4. The central concern of economics is:A. poverty.B. scarcity.C. wealth accumulation.D. overconsumption.5. The scarcity principle indicates that:A. no matter how much one has, it is never enough.B. compared to 100 years ago, individuals have less time today.C. with limited resources, having more of "this" means having less of "that."D. because tradeoffs must be made, resources are therefore scarce.6. The logical implication of the scarcity principle is that:A. one will never be satisfied with what one has.B. as wealth increases, making choices becomes less necessary.C. as wealth decreases, making choices becomes less necessary.D. choices must be made.7. If all the world's resources were to magically increase a hundredfold, then:A. the scarcity principle would still govern behavior.B. economics would no longer be relevant.C. the scarcity principle would disappear.D. tradeoffs would become unnecessary.8. The principle of scarcity applies to:A. the poor exclusively.B. all consumers.C. all firms.D. everyone—consumers, firms, governments, and nations.9. At the very least, Joe Average and Bill Gates are both identically limited by:A. their wealth.B. the 24 hours that comprise a day.C. their knowledge.D. their influence.10. Forest is a mountain man living in complete isolation in Montana. He is completely self-sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer:A. the scarcity principle does not apply to Forest.B. Forest is not required to make choices.C. the scarcity principle still applies because more hunting means less fishing and farming.D. Forest is very satisfied.11. The scarcity principle applies to:A. all decisions.B. only market decisions, e.g., buying a car.C. only non-market decisions, e.g., watching a sunset.D. only the poor.12. Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:A. not an economic problem because neither one costs money.B. not an economic problem because it's an hour that is wasted no matter what Chris does.C. an economic problem because the tuition Chris pays covers both the gym and the library.D. an economic problem because Chris has only one hour during which he can study or work out.13. Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decided to stay home and work on the paper. According to the scarcity principle, the reason Josh didn't go to the game is that:A. Josh prefers schoolwork to football games.B. writing the paper is easier than going to the game.C. Josh doesn't have enough time for writing the paper and going to the game.D. it's too expensive to go to the game.14. Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is that wants are:A. limited, resources are limited, and thus choices must be made.B. unlimited, resources are limited, and thus choices must be made.C. unlimited, resources are limited to some but not to others, and thus some people must make choices.D. unlimited, resources are limited, and thus government needs to do more.15. The cost-benefit principle indicates that an action should be taken:A. if the total benefits exceed the total costs.B. if the average benefits exceed the average costs.C. if the net benefit (benefit minus cost) is zero.D. if the extra benefit is greater than or equal to the extra costs.16. When a person decides to pursue an activity as long as the extra benefits are at least equal to the extra costs, that person is:A. violating the cost-benefit principle.B. following the scarcity principle.C. following the cost-benefit principle.D. pursuing the activity too long.17. Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is:A. not rational.B. an application of the cost-benefit principle.C. an application of the scarcity principle.D. the relevant opportunity cost.18. The scarcity principle tells us that __________, and the cost-benefit principle tells us __________.A. choices must be made; how to make the choicesB. choices must be made; that the costs can never outweigh the benefits of the choicesC. rare goods are expensive; that the costs should outweigh the benefits of the choicesD. rare goods are expensive; that the costs can never outweigh the benefits of the choices19. According to the cost-benefit principle:A. the lowest cost activity usually gives the lowest benefit.B. a person should always choose the activity with the lowest cost.C. a person should always choose the activity with the greatest benefit.D. the extra costs and benefits of an activity are more important considerations than the total costs and benefits.20. A rational person is one who:A. is reasonable.B. makes choices that are easily understood.C. possesses well-defined goals and seeks to achieve them.D. is highly cynical.21. The seventh glass of soda that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero (Tim is eating at the cafeteria). The cost-benefit principle predicts that Tim will:A. realize he has had too much soda to drink and go home.B. drink the seventh glass and continue until the marginal benefit of drinking another glass of soda is zero.C. volunteer to empty out the fountain.D. not drink the seventh glass.22. Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $45, respectively. She dislikes both equally and they both take the same amount of time. Janie will therefore choose to _________ because the economic surplus is ________.A. mow the lawn; greaterB. wash clothes; greaterC. mow the lawn; smallerD. wash clothes; smaller23. Dean decided to play golf rather than prepare for tomorrow's exam in economics. One can infer that:A. Dean has made an irrational choice.B. Dean is doing poorly in his economics class.C. the economic surplus from playing golf exceeded the surplus from studying.D. the cost of studying was less than the cost of golfing.Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year.24. The opportunity cost of attending Elite U is:A. $50,000B. $10,000C. $20,000D. $15,00025. The opportunity cost of attending State College is:A. $30,000B. $20,000C. $15,000D. $10,00026. Larry maximizes his surplus by attending:A. Elite U, because $60,000 is greater than the benefit at the other schools.B. State College, because the difference between the benefit and cost is greatest there.C. NoName U, because Larry has a full scholarship there.D. Elite U, because the opportunity costs of attending Elite U are the lowest.27. Larry has decided to go to Elite U. Assuming that all of the values described are correct, for Larry to decide on Elite U, he must have:A. calculated his surplus from each choice and picked the one with the highest surplus.B. underestimated the benefits of attending NoName.C. miscalculated the surplus of attending Elite U.D. determined the opportunity cost of each choice and picked the one with the lowest opportunity cost.28. Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is:A. the $12 she spent on the umbrella, food and drinks.B. only $1 because she would have spent the money on food and drinks whether or not she went to the beach.C. the movie she missed seeing.D. the movie she missed seeing plus the $12 she spent on the umbrella, food and drinks.29. Relative to a person who earns minimum wage, a person who earns $30 per hour has:A. a lower opportunity cost of working longer hours.B. a higher opportunity cost of taking a day off.C. a lower opportunity cost of driving farther to work.D. the same opportunity cost of spending time on leisure activities.30. The opportunity cost of an activity is the value of:A. an alternative forgone.B. the next-best alternative forgone.C. the least-best alternative forgone.D. the difference between the chosen activity and the next-best alternative forgone.31. Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The cost of seeing the movie is:A. $7.B. $30.C. $37.D. $37 minus the benefit of seeing the movie.32. Economic surplus is:A. the benefit gained by taking an action.B. the price paid to take an action.C. the difference between the benefit gained and the cost incurred of taking an action.D. the wage someone would have to earn in order to take an action.33. The Governor of your state has cut the budget for the University and increased spending on Medicaid. This is an example of:A. the pitfalls of considering average costs instead of marginal costs.B. poor normative economic decision making.C. poor positive economic decision making.D. choice in the face of limited resources.34. Sally earned $25,000 per year before she became a mother. After she became a mother, she told her employer that her opportunity cost of working is now $50,000, and so she is not willing to work for anything less. Her decision is based on:A. the high cost of raising a child.B. her desire to save for her child's college expenses.C. her increased value to her employer.D. the value she places on spending time with her child.35. Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. As a result:A. attending State U. for four years is costless for Alex.B. Alex has no incentive to work hard while at State U.C. the cost of attending State U. is the amount of money Alex could have earned working for four years.D. the cost of attending State U. is the sum of the benefits Alex would have had attending each of the four other schools to which Alex had been admitted.36. Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck, but she finds one for $12,000. Her __________ is __________.A. benefit; $12,000B. cost; $15,000C. economic surplus; $3,000D. economic surplus; $12,00037. In general, rational decision making requires one to choose the actions that yield the:A. largest total benefits.B. smallest total costs.C. smallest net benefits.D. largest economic surpluses.38. Suppose the most you would be willing to pay for a plane ticket home is $250, but you buy one online for $175. The economic surplus of buying the online ticket is:A. $175.B. $250.C. $75.D. $0.39. The use of economic models, like the cost-benefit principle, means economists believe that:A. this is exactly how people choose between alternatives.B. this is a reasonable abstraction of how people choose between alternatives.C. those who explicitly make decisions this way are smarter.D. with enough education, all people will start to explicitly make decisions this way.40. Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20. After the movie, she says to one of her friends that the movie was not worth it. Apparently:A. Jenna failed to apply the cost-benefit model to her decision.B. Jenna was not rational.C. Jenna overestimated the benefits of the movie.D. Jenna underestimated the benefits of the movie.41. Most of us make sensible decisions most of the time, because:A. we know the cost-benefit principle.B. subconsciously we are weighing costs and benefits.C. most people know about the scarcity principle.D. we conduct hypothetical mental auctions when we make decisions.42. Suppose a person makes a choice that seems inconsistent with the cost-benefit principle. Which of the following statements represents the most reasonable conclusion to draw?A. The person (explicitly or implicitly) over-estimated the benefits or under-estimated the costs or both.B. The cost-benefit principle is rarely true.C. The person does not grasp how decisions should be made.D. The person is simply irrational.43. Economic models are intended to:A. apply to all examples equally well.B. eliminate differences in the way people behave.C. generalize about patterns in decision-making.D. distinguish economics students from everyone else.44. Economic models claim to be:A. reasonable abstractions of how people make choices, highlighting the most important factors.B. exact replications of the decision-making process people use.C. interesting chalkboard exercises with little applicability to the real world.D. exceptionally accurate methods of predicting nearly all behavior of everyone.45. The cost-benefit model used by economists is:A. unrealistic because it is too detailed and specific to apply to a variety of situations.B. unrealistic because everyone can think of times when he or she violated the principle.C. useful because everyone follows it all of the time.D. useful because most people follow it most of the time.46. Barry owns a clothing store in the mall and has asked two economic consultants to develop models of consumer behavior that he can use to increase sales. Barry should choose the model that:A. does not include simplifying assumptions.B. is the most detailed and complex.C. assumes that consumers apply the cost-benefit principle.D. predicts that consumers will always prefer Barry's store to the competing stores.47. Economists use abstract models because:A. every economic situation is unique, so it is impossible to make generalizations.B. every economic situation is essentially the same, so specific details are unnecessary.C. they are useful for describing general patterns of behavior.D. computers have allowed economists to develop abstract models.48. Most people make some decisions based on intuition rather than calculation. This is:A. irrational, because intuition is often wrong.B. consistent with the economic model of decision-making, because calculating costs and benefits leads to decision-making pitfalls.C. consistent with the economic model because people intuitively compare the relative costs and benefits of the choices they face.D. inconsistent with the economic model, but rational because intuition takes into account non-financial considerations.49. Moe has a big exam tomorrow. He considered studying this evening, but decided to go out with Curly instead. Since Moe always chooses rationally, it must be true that: A. the opportunity cost of studying tonight is less than the value Moe gets from spending time with Curly.B. the opportunity cost of studying tonight is equal to the value Moe gets from spending time with Curly minus the cost of earning a low grade on the exam.C. Moe gets more benefit from spending time with Curly than from studying.D. Moe gets less benefit from spending time with Curly than from studying.50. If one fails to account for implicit costs in decision making, then applying thecost-benefit rule will be flawed because:A. the benefits will be overstated.B. the costs will be understated.C. the benefits will be understated.D. the costs will be overstated.Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450.51. If you do not use the frequent-flyer coupon to fly, should you go to Miami?A. Yes, your benefit is more than your cost.B. No, your benefit is less than your cost.C. Yes, your benefit is equal to your cost.D. No, because there are no benefits in the trip.52. What is the opportunity cost of using the coupon for the Miami trip?A. $100B. $450C. $500D. $55053. If you use the frequent-flyer coupon to fly to Atlanta, would you get any economic surplus by making the trip?A. No, there is a loss of $50.B. Yes, surplus of $350.C. Yes, surplus of $400.D. Yes, surplus of $100.54. If the Chicago-Atlanta round-trip air fare is $350, should you go to Miami?A. No, there is a loss of $50.B. No, there is a loss of $100.C. Yes, there is economic surplus of $50.D. Yes, there is economic surplus of $400.55. Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school children. Childcare for their children costs $12,000 per year. Pat has decided to stay home and take care of the children. Pat must:A. value spending time with the children by more than $25,000.B. value spending time with the children by more than $12,000.C. value spending time with the children by more than $13,000.D. value spending time with the children as much as does Chris.You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr.56. Should you go to the concert instead of working Saturday?A. Yes, your benefit is more than your cost.B. No, your benefit is less than your cost.C. Yes, your benefit is equal to your cost.D. No, because there are no benefits in the concert.57. What is the opportunity cost of going to the concert?A. $1B. $9C. $35D. $3658. What is your opportunity cost, if you go to work on Saturday?A. $0B. $9C. $35D. $3659. Your economic surplus of going to work on Saturday is:A. $0B. $1C. $35D. $36Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.因为他们提供75折的正常价格16美元。

尼科尔森《微观经济理论-基本原理与扩展》（第9版）第14章 不完全竞争市场的传统模型课后习题详解跨考网独家整理最全经济学考研真题，经济学考研课后习题解析资料库，您可以在这里查阅历年经济学考研真题，经济学考研课后习题，经济学考研参考书等内容，更有跨考考研历年辅导的经济学学哥学姐的经济学考研经验，从前辈中获得的经验对初学者来说是宝贵的财富，这或许能帮你少走弯路，躲开一些陷阱。

以下内容为跨考网独家整理，如您还需更多考研资料，可选择经济学一对一在线咨询进行咨询。

1．为了简单起见，假设垄断者没有生产成本且它所面临的需求曲线由下式给定：150Q P =- （1）计算这一垄断者利润最大化时的价格—产量组合，并计算该厂商的垄断利润。

（2）假设第二个厂商进入了市场。

令1q 为第一个厂商的产出，2q 为第二个厂商的产出。

市场需求由下式给出12150q q P +=-假设第二个厂商也没有生产成本，运用双头垄断的古诺模型，确定一下利润最大化时每个厂商的产出水平及市场价格，并且计算每个厂商的利润。

（3）怎样把（1）与（2）中结果与完全竞争市场中的价格—产量组合相比较？画出需求曲线与边际收益曲线图形，并且指明需求曲线上的三个不同的价格—产量组合。

解：（1）因为150Q P =-，所以反需求曲线为150P Q =-，则该垄断者的利润函数为：()2150150PQ C Q Q Q Q π=-=-=-+利润最大化的一阶条件为：d 21500d Q Qπ=-+=，解得75Q =。

此时利润最大化时的价格为15075P Q =-=； 该厂商的垄断利润为21505625Q Q π=-+=。

（2）对于厂商1而言，其利润函数为：()11121150Pq C q q q π=-=--利润最大化的一阶条件为：112115020q q q π∂=--=∂，因而厂商1的反应函数为： 12750.5q q =- ①同理可得厂商2的反应函数为：21750.5q q =- ② 在古诺竞争均衡时，有①、②两式同时成立，因而可以解得古诺竞争均衡中两厂商的产量分别为：1250q q ==。

精品文档-可编辑内蒙古农业大学微观经济学课程测试试卷（A ）P l e a s e p r i n t . I f t h e a n s w e r i s u n r e c o g n i z a b l e , i t w i l l b e c o u n t e d a s w r o n g a n s w e r .Y o u s h o u l d a n s w e r i n E n g l i s h o r C h i n e s e , n u m b e r s , o r g r a p h s .Ⅰ. C o n c e p t s （3 p o i n t s e a c h , t o t a l 15 p o i n t s ）1. O p p o r t u n i t y c o s t2. E x t e r n a l i t y3. D e a d w e i g h t l o s s4. C o m p e t i t i v e m a r k e t5. D i m i n i s h i n g m a r g i n a l p r o d u c tⅡ. T r u e o r F a l s e Q u e s t i o n s (2 p o i n t s e a c h ，t o t a l 20 p o i n t s )( f ) 1.I f a p p l e a n d o r a n g e a r e s u b s t i t u t e s , w h e n p r i c e o f a p p l e i n c r e a s e s , t h e n t h e d e m a n d f o r o r a n g e d e c r e a s e s .(f)2.T h e p r i c e e l a s t i c i t y o f d e m a n d r e m a i n s c o n s t a n t a l o n g a l i n e a r d e m a n d c u r v e.(t)3.W h e n p r i c e c e i l i n g i s b e l o w e q u i l i b r i u m p r i c e i n a c o m p e t i t i v e m a r k e t,t h e p r i c e c e i l i n g i s b i n d i n g,a n d t h e r e i s s h o r t a g e i n t h e m a r k e t.(t)4.T o t a l s u r p l u s i s t h e v a l u e s t o b u y e r s m i n u s t h e c o s t t o s e l l e r s.(f)5.W h e n t a x e d i s l e v i e d o n t h e g o o d i n a c o m p e t i t i v e m a r k e t, t h e t a x r e v e n u e g o t b y t h e g o v e r n m e n t e q u a l s t h e f a l l i n p r o d u c e r a n d c o n s u m e r s u r p l u s.(f)6.I f t h e w o r l d p r i c e o f a g o o d e x c e e d s t h e d o m e s t i c p r i c e, t h e c o u n t r y s h o u l d i m p o r t t h e g o o d i n s t e a d t o e x p o r t i t. (t)7.I n t h e p r e s e n c e o f a n e g a t i v e e x t e r n a l i t y,Qi so p t i m u m.t h e r e f o r e l a r g e r t h a n t h e Qm a r k e t(f)8.P r i c e a l w a y s e q u a l s t o m a r g i n a l r e v e n u e f o r a l l k i n d s o f f i r m s.(t)9.D e m a n d c u r v e f o r a m o n o p o l y f i r m i s t h e m a r k e t d e m a n d c u r v e.(f)10.I n t h e l o n g r u n,m o n o p o l i s t i c c o m p e t i t i v e f i r m s p r o d u c e a t t h e i r l o w e s t a v e r a g e t o t a l c o s t.Ⅲ.S i n g l e C h o i c e Q u e s t i o n s(2p o i n t s e a c h，t o t a l20p o i n t s)(d)1.I f t h e c r o s s-p r i c e e l a s t i c i t y o f d e m a n d f o r t w o g o o d s i s n e g a t i v e,t h e s e t w o g o o d a r e?A.L u x u r y g o o d s.B.N e c e s s i t i e s.C.S u b s t i t u t e s.D.C o m p l e m e n t s.(a)2.A l t h o u g h b u y e r s a n d s e l l e r s s h a r e t h e b u r d e n o f t a x t o g e t h e r,s e l l e r s s h a r e m o r e i f t h e g o o d i s________A.F o o d.B.C l o t h e s.C.H o u s i n g.D.E n t e r t a i n m e n t g o o d.(c)3.C o n s u m e r s u r p l u s i s t h e a r e a＿＿＿＿A.A b o v e t h e s u p p l y c u r v e a n d b e l o w t h e p r i c e.B.B e l o w t h e s u p p l y c u r v e a n d b e l o w t h e p r i c eC.B e l o w t h e d e m a n d c u r v e a n d a b o v e t h e p r i c eD.B e l o w t h e d e m a n d c u r v e a n d b e l o w t h e p r i c e(a)4.I f w e d o u b l e t h e s i z e o f t a x u n d e r t h e p e r f e c t l y c o m p e t i t i v e m a r k e t,s o t h e d e a d w e i g h t l o s s_____________A.I s f o u r t i m e s a s t h e o r i g i n a l o n e.B.I s t w i c e a s t h e o r i g i n a l o n e.C.R e m a i n t h e s a m eD.M a y i n c r e a s e o r d e c r e a s e.(b)5.W h i c h o f t h e f o l l o w i n g i t e m s i s a n e x a m p l e o f p u b l i c g o o d s?A.F i s h e s i n t h e o c e a n.B.N a t i o n a l d e f e n s e.C.A p p l e s o n a h o u s e h o l d’s a p p l e t r e e.D.H o t d o g s i n a p i c n i c.()6.I f t h e p r o d u c t i o n f u n c t i o n h a s t h e a t t r i b u t e o fd i m i n i s h i n g m a r g i n a l re t u r n s,t h e s l o p e of t h e t o t a l c o s t c u r v e w h i c h i s a s s o c i a t e d w i t h t h e p r o d u c t i o n f u n c t i o nA.I n c r e a s e s w h e n p r o d u c e d q u a n t i t y i n c r e a s eB.D e c r e a s e s w h e n p r o d u c e d q u a n t i t y i n c r e a s e.C.R e m a i n s t h e s a m e.D.M a y b e a n y o n e m e n t i o n e d a b o v e.(d)7.I f t h e m a r g i n a l c o s t c u r v e i s b e l o w t h e a v e r a g e t o t a l c o s t c u r v e,_________.A.A v e r a g e t o t a l c o s t i n c r e a s e s.B.A v e r a g e f i x e d c o s t i n c r e a s e s.C.A v e r a g e t o t a l c o s t a c h i e v e s i t s m i n i m u m.D.A v e r a g e t o t a l c o s t d e c r e a s e s.( b ) 8. I f a c o m p e t i t i v e f i r m a c h i e v e i t s l o n g -r u ne q u i l i b r i u m s t a t e ,A. I t s a v e r a g e t o t a l c o s t a c h i e v e s i t s m i n i m u m .B. M a r g i n a l c o s t e q u a l s m a r g i n a l r e v e n u e .C. I t g e t s z e r o e c o n o m i c p r o f i t .D. A l l t h e i t e m s m e n t i o n e d a b o v e a r e c o r r e c t .( a ) 9. T h e i n e f f i c i e n c y o f m o n o p o l y i s c a u s e d b y _______A. D e f i c i e n t p r o d u c t i o n o f m o n o p o l y .B. O v e r p r o d u c t i o n o f m o n o p o l y .C. M o n o p o l i s t i c p r o f i t .D. M o n o p o l i s t i c l o s s .( a ) 10.T h e m e a n i n g o f “m o n o p o l i s t i c ” i n “m o n o p o l i s t i c c o m p e t i t i o n ” i s ______A . m o n o p o l i s t i c c o m p e t i t i v e f i r m f a c e s a d o w n w a r d s l o p i n g d e m a n d c u r v e .B . m o n o p o l i s t i c c o m p e t i t i v e f i r m c a n f r e e l y e n t e r a n d e x i t t h e m a r k e t .C . m o n o p o l i s t i c c o m p e t i t i v e f i r m c h a r g e s t h e p r i c e a si t s m a r g i n a l c o s t .D . m o n o p o l i s t i c c o m p e t i t i v e f i r m p r o d u c e a t i t se f f i c i e n t s c a l e .Ⅳ. P r o b l e m s f o r c a l c u l a t i o n (t o t a l 20 p o i n t s )1. T h e m o n o p o l y ’s c o s t i s a f u n c t i o n o f i t s o u t p u t , w h i c h i sC(Q)=Q22+12,a n d t h e m o n o p o l y f a c e s t h e l i n e a r i n v e r s e d e m a n df u n c t i o n:P=24—Q(t o t a l10p o i n t s)(1)C a l c u l a t e f o l l o w i n g i t e m s:m a r g i n a l c o s t,a v e r a g e f i x e dc o s t,a v e r a g e v a r i a b l e c o s t,a v e r a g e t o t a l c o s t,a nd m a r g i n a l re v e n u e(5p o i n t s)(2)C a l c u l a t e p r o f i t-m a x i m i z i n g o u t p u t(2p o i n t s)a n d p r o f i t-m a x i m i z i n g p r i c e(1p o i n t),d e t e r m i n e i t s e c o n o m i c p r o f i t(2p o i n t s)2.T h e f o l l o w i n g i s t h e d e m a n d s c h e d u l e f o r c o n s u m e r s o f w a t c h i n g t w o i d e n t i c a l b a s e b a l l g a m e s i n a c i t y.T h e b a s e b a l l f i e l d a n d b a s e b a l l p l a y e r s f o r t h e s e t w o t e a m s a r e f r e e l y p r o v i d e d b y t h e b a s e b a l l l e a g u e(t o t a l10p o i n t s)(1)I f i t i s a p e r f e c t l y c o m p e t i t i v e m a r k e t,d e t e r m i n e t h e p r i c e a n d q u a n t i t y.(2p o i n t s)(2)I f t h e d u o p o l y m a k e s c o l l u s i o n t o b e c o m e a c a r t e l,d e t e r m i n e t h e p r i c e,q u a n t i t y a n d p r o f i t f o r e a c h f i r m i f t h e o n l y g o a l f o r t h e m i s p r o f i t m a x i m i z i n g.(3p o i n t s)(3)I f t h e y f a i l t o m a k e c o l l u s i o n,d e t e r m i n e t h e i r i n d i v i d u a l p r o f i t i f N a s h e q u i l i b r i u m i s a c h i e v e d.(3p o i n t s)(4)D r a w o u t t w o t e a m’s s t r a t e g i e s a b o u t t h e i r o u t p u t s a n d p r o f i t s(N o t e:U s e t h e c h a r t o f p r i s o n e r’d i l e m m a s h o w n i n o u r t e x t b o o k,p l e a s e).(2p o i n t s)Ⅴ.S h o r t a n s w e r s i t e m s(t o t a l25p o i n t s)1.W h y f i r m s i n a p e r f e c t l y c o m p e t i t i v e m a r k e t p r o d u c e a t t h e i re f f i c i e n t s c a l e s w h e n t h e y a c h i e v e t h e i r l o n g r u n e q u i l i b r i u m? (5p o i n t s)完全竞争厂商在长期内对全部生产要素的调整可以表现为两个方面：一方面表现为厂商进入或退出一个行业，这也就是行业内企业数量的调整；另一方面表现为厂商对生产规模的调整。

✍ how to define and measure consumer surplus.✍ the link between sellers’ costs of producing a good and the supply curve.✍ how to define and measure producer surplus.✍ that the equilibrium of supply and demand maximizes total surplus in a market. CONTEXT AND PURPOSE:Chapter 7 is the first chapter in a three-chapter sequence on welfare economics and market efficiency. Chapter 7 employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 and 9 to determine the winners and losers from taxation and restrictions on international trade.The purpose of Chapter 7 is to develop welfare economics—the study of how the allocation of resources affects economic well-being. Chapters 4 through 6 employed supply and demand in a positive framework, which focused on the question, “What is the equilibrium price and quantity in a market?” This chapter now addresses the normative question, “Is the equilibrium price and quantity in a market the best possible solution to the resource allocation problem, or is it simply the price and quantity that balance supply and demand?” Students will discover that under most circumstances the equilibrium price and quantity is also the one that maximizes welfare.KEY POINTS:? Consumer surplus equals buyers’ willingness to pay for a good minus the amount they actually pay for it, and it measures the benefit buyers get from participating in a market.Consumer surplus can be computed by finding the area below the demand curve and above the price.? Producer surplus equals the amount sellers receive for their goods minus their costs of production, and it measures the benefit sellers get from participating in a market. Producer surplus can be computed by finding the area below the price and above the supply curve.? An allocation of resources that maximizes the sum of consumer and producer surplus is said to be efficient. Policymakers are often concerned with the efficiency, as well as the equality, of economic outcomes.? The equilibrium of supply and demand maximizes the sum of consumer and producer surplus.That is, the invisible hand of the marketplace leads buyers and sellers to allocate resources efficiently.? Markets do not allocate resources efficiently in the presence of market failures such as market power or externalities.CHAPTER OUTLINE:I. Definition of welfare economics: the study of how the allocation of resources affects economic well-being.A. Willingness to Pay1. Definition of willingness to pay: the maximum amount that a buyer will pay for a good.2. Example: You are auctioning a mint-condition recording of Elvis Presley’s first album. Four buyers show up. Their willingness to pay is as follows:for John. Because John is willing to pay more than he has to for the album,he derives some benefit from participating in the market.3. Definition of consumer surplus: the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.4. Note that if you had more than one copy of the album, the price in the auction would end up being lower (a little over $70 in the case of two albums) and both John and Paul would gain consumer surplus.B. Using the Demand Curve to Measure Consumer Surplus1. We can use the information on willingness to pay to derive a demand curve for the rare2. . Because the demand curve shows the buyers’ willingness to pay, we can use the demand curve to measure consumer surplus.C. How a Lower Price Raises Consumer Surplusare paying less for the product than before (area A on the graph).b. Because the price is now lower, some new buyers will enter the market and receive consumer surplus on these additional units of output purchased (area B on the graph).D. What Does Consumer Surplus Measure?1. Remember that consumer surplus is the difference between the amount that buyers are willing to pay for a good and the price that they actually pay.2. Thus, it measures the benefit that consumers receive from the good as the buyers themselves perceive it.III. Producer SurplusA. Cost and the Willingness to Sell1. Definition of cost: the value of everything a seller must give up to produce a good .2. Example: You want to hire someone to paint your house. You accept bids for the work from four sellers. Each painter is willing to work if the price you will pay exceeds her opportunity cost. (Note that this opportunity cost thus represents willingness to sell.) The costs are: ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price ceilings from Chapter 6. Redraw the market for two-bedroom apartments in your town. Draw in a price ceiling below the equilibriumprice.Then go through:✍ consumer surplus before the price ceiling is put into place.✍ consumer surplus after the price ceiling is put into place.You will need to take some time to explain the relationship between the producers’ willingness to sell and the cost of producing the good. The relationship between cost and the supply curve is not as apparent as the relationship between the demand curve and willingness to pay. It is important to stress that consumer surplus is measured in monetary terms. Consumer surplus gives us a way to place a monetary cost on inefficient market outcomes (due to government involvement or market failure).except for Grandma. Because Grandma receives more than she would require to paint the house, she derives some benefit from producing in the market.4.Definition of producer surplus: the amount a seller is paid for a good minus the seller’s cost of providing it.5. Note that if you had more than one house to paint, the price in the auction would end up being higher (a little under $800 in the case of two houses) and both Grandma and Georgia would gain producer surplus.B. Using the Supply Curve to Measure Producer Surplus1. We can use the information on cost (willingness to sell) to derive a supply curve for2. marginal seller . Because the supply curve shows the sellers’ cost (willingness to sell), we can use the supply curve to measure producer surplus.are receiving more for the product than before (area C on the graph).b. Because the price is now higher, some new sellers will enter the market and receive producer surplus on these additional units of output sold (area D on the graph).D. Producer surplus is used to measure the economic well-being of producers, much like consumer surplus is used to measure the economic well-being of consumers.ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price floors from Chapter 6. Redraw the market for anagricultural product such as corn. Draw in a price support above the equilibriumprice.Then go through:✍ producer surplus before the price support is put in place.✍ producer surplus after the price support is put in place.Make sure that you discuss the cost of the price support to taxpayers.IV.Market EfficiencyA. The Benevolent Social Planner1. The economic well-being of everyone in society can be measured by total surplus, which is the sum of consumer surplus and producer surplus:Total Surplus = Consumer Surplus + Producer SurplusTotal Surplus = (Value to Buyers – Amount Paid by Buyers) +(Amount Received by Sellers – Cost to Sellers)Because the Amount Paid by Buyers = Amount Received bySellers:2. Definition of efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society .3. Definition of equality: the property of distributing economic prosperity uniformly the members of society .a. Buyers who value the product more than the equilibrium price will purchase the product; those who do not, will not purchase the product. In other words, the free market allocates the supply of a good to the buyers who value it most highly, as measured by their willingness to pay.b. Sellers whose costs are lower than the equilibrium price will produce the product; those whose costs are higher, will not produce the product. In other words, the free market allocates the demand for goods to the sellers who can produce it at the lowest cost.to the marginal buyer is greater than the cost to the marginal seller so total surplus would rise if output increases.b. At any quantity of output greater than the equilibrium quantity, the value of the product to the marginal buyer is less than the cost to the marginal seller so total surplus would rise if output decreases.3. Note that this is one of the reasons that economists believe Principle #6: Markets are usually a good way to organize economic activity.It would be a good idea to remind students that there are circumstances whenthe market process does not lead to the most efficient outcome. Examplesinclude situations such as when a firm (or buyer) has market power over priceor when there are externalities present. These situations will be discussed inlater chapters.Pretty Woman, Chapter 6. Vivien (Julia Roberts) and Edward (Richard Gere)negotiate a price. Afterward, Vivien reveals she would have accepted a lowerprice, while Edward admits he would have paid more. If you have done a goodjob of introducing consumer and producer surplus, you will see the light bulbsgo off above your students’ heads as they watch this clip.C. In the News: Ticket Scalping1. Ticket scalping is an example of how markets work to achieve an efficient outcome.2. This article from The Boston Globe de scribes economist Chip Case’s experience with ticket scalping.D. Case Study: Should There Be a Market in Organs?1. As a matter of public policy, people are not allowed to sell their organs.a. In essence, this means that there is a price ceiling on organs of $0.b. This has led to a shortage of organs.2. The creation of a market for organs would lead to a more efficient allocation of resources, but critics worry about the equity of a market system for organs.V. Market Efficiency and Market FailureA. To conclude that markets are efficient, we made several assumptions about how markets worked.1. Perfectly competitive markets.2. No externalities.B. When these assumptions do not hold, the market equilibrium may not be efficient.C. When markets fail, public policy can potentially remedy the situation. SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. Figure 1 shows the demand curve for turkey. The price of turkey is P1 and the consumer surplus that results from that price is denoted CS. Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. It measures the benefit to buyers of participating in a market.Figure 1 Figure 22. Figure 2 shows the supply curve for turkey. The price of turkey is P1 and the producer surplus that results from that price is denoted PS. Producer surplus is the amount sellers are paid for a good minus the sellers’ cost of providing it (measured by the supply curve). It measures the benefit to sellers of participating in a market.Figure 33. Figure 3 shows the supply and demand for turkey. The price of turkey is P1, consumer surplus is CS, and producer surplus is PS. Producing more turkeys than the equilibrium quantity would lower total surplus because the value to the marginal buyer would be lower than the cost to the marginal seller on those additional units.Questions for Review1. The price a buyer is willing to pay, consumer surplus, and the demand curve are all closely related. The height of the demand curve represents the willingness to pay of the buyers. Consumer surplus is the area below the demand curve and above the price, which equals the price that each buyer is willing to pay minus the price actually paid.2. Sellers' costs, producer surplus, and the supply curve are all closely related. The height of the supply curve represents the costs of the sellers. Producer surplus is the area below the price and above the supply curve, which equals the price received minus each seller's costs of producing the good.Figure 43. Figure 4 shows producer and consumer surplus in a supply-and-demand diagram.4. An allocation of resources is efficient if it maximizes total surplus, the sum of consumer surplus and producer surplus. But efficiency may not be the only goal of economic policymakers; they may also be concerned about equity the fairness of the distribution of well-being.5. The invisible hand of the marketplace guides the self-interest of buyers and sellers into promoting general economic well-being. Despite decentralized decision making and self-interested decision makers, free markets often lead to an efficient outcome.6. Two types of market failure are market power and externalities. Market power may cause market outcomes to be inefficient because firms may cause price and quantity to differ from the levels they would be under perfect competition, which keeps total surplus from being maximized. Externalities are side effects that are not taken into account by buyers and sellers. As a result, the free market does not maximize total surplus.Problems and Applications1. a. Consumer surplus is equal to willingness to pay minus the price paid. Therefore, Melissa’s willingness to pay must be $200 ($120 + $80).b. Her consumer surplus at a price of $90 would be $200 ? $90 = $110.c. If the price of an iPod was $250, Melissa would not have purchased one because the price is greater than her willingness to pay. Therefore, she would receive no consumer surplus.2. If an early freeze in California sours the lemon crop, the supply curve for lemons shifts to the left, as shown in Figure 5. The result is a rise in the price of lemons and a decline in consumer surplus from A + B + C to just A. So consumer surplus declines by the amount B + C.Figure 5 Figure 6In the market for lemonade, the higher cost of lemons reduces the supply of lemonade, as shown in Figure 6. The result is a rise in the price of lemonade and a decline in consumer surplus from D + E + F to just D, a loss of E + F. Note that an event that affects consumer surplus in one market often has effects on consumer surplus in other markets.3. A rise in the demand for French bread leads to an increase in producer surplus in the market for French bread, as shown in Figure 7. The shift of the demand curve leads to an increased price, which increases producer surplus from area A to area A + B + C.Figure 7The increased quantity of French bread being sold increases the demand for flour, as shown in Figure 8. As a result, the price of flour rises, increasing producer surplus from area Dto D + E + F. Note that an event that affects producer surplus in one market leads to effects on producer surplus in related markets.Figure 84. a.Figure 9b. When the price of a bottle of water is $4, Bert buys two bottles of water. His consumer surplus is shown as area A in the figure. He values his first bottle of water at $7, but pays only $4 for it, so has consumer surplus of $3. He values his second bottle of water at $5, but pays only $4for it, so has consumer surplus of $1. Thus Bert’s total consumer surplus is $3 + $1 = $4, which is the area of A in the figure.c. When the price of a bottle of water falls from $4 to $2, Bert buys three bottles of water, an increase of one. His consumer surplus consists of both areas A and B in the figure, an increase in the amount of area B. He gets consumer surplus of $5 from the first bottle ($7 value minus $2 price), $3 from the second bottle ($5 value minus $2 price), and $1 from the third bottle ($3 value minus $2 price), for a total consumer surplus of $9. Thus consumer surplus rises by $5 (which is the size of area B) when the price of a bottle of water falls from $4 to $2.5. a.Figure 10b. When the price of a bottle of water is $4, Ernie sells two bottles of water. His producer surplus is shown as area A in the figure. He receives $4 for his first bottle of water, but it costs only $1 to produce, so Ernie has producer surplus of $3. He also receives $4 for his second bottle of water, which costs $3 to produce, so he has producer surplus of $1. Thus Ernie’s total producer surplus is $3 + $1 = $4, which is the area of A in the figure.c. When the price of a bottle of water rises from $4 to $6, Ernie sells three bottles of water, an increase of one. His producer surplus consists of both areas A and B in the figure, an increase by the amount of area B. He gets producer surplus of $5 from the first bottle ($6 price minus $1 cost), $3 from the second bottle ($6 price minus $3 cost), and $1 from the third bottle ($6 price minus $5 price), for a total producer surplus of $9. Thus producer surplus rises by $5 (which is the size of area B) when the price of a bottle of water rises from $4 to $6.6. a. From Ernie’s supply schedule and Bert’s demand schedule, the quantityequilibrium quantity of two.b. At a price of $4, consumer surplus is $4 and producer surplus is $4, as shown in Problems 3 and 4 above. Total surplus is $4 + $4 = $8.c. If Ernie produced one less bottle, his producer surplus would decline to $3, as shown in Problem 4 above. If Bert consumed one less bottle, his consumer surplus would decline to $3, as shown in Problem 3 above. So total surplus would decline to $3 + $3 = $6.d. If Ernie produced one additional bottle of water, his cost would be $5, but the price is only $4, so his producer surplus would decline by $1. If Bert consumed one additional bottle of water, his value would be $3, but the price is $4, so his consumer surplus would decline by $1. So total surplus declines by $1 + $1 = $2.7. a. The effect of falling production costs in the market for stereos results in a shift to the right in the supply curve, as shown in Figure 11. As a result, the equilibrium price of stereos declines and the equilibrium quantity increases.Figure 11b. The decline in the price of stereos increases consumer surplus from area A to A + B + C + D, an increase in the amount B + C + D. Prior to the shift in supply, producer surplus was areas B + E (the area above the supply curve and below the price). After the shift in supply, producer surplus is areas E + F + G. So producer surplus changes by the amount F + G – B, which may be positive or negative. The increase in quantity increases producer surplus, while the decline in the price reduces producer surplus. Because consumer surplus rises by B + C + D and producer surplus rises by F + G – B, total surplus rises by C + D + F + G.c. If the supply of stereos is very elastic, then the shift of the supply curve benefits consumers most. To take the most dramatic case, suppose the supply curve were horizontal, as shown in Figure 12. Then there is no producer surplus at all. Consumers capture all the benefits of falling production costs, with consumer surplus rising from area A to area A + B.Figure 128. Figure 13 shows supply and demand curves for haircuts. Supply equals demand at a quantity of three haircuts and a price between $4 and $5. Firms A, C, and D should cut the hair of Ellen, Jerry, and Phil. Oprah’s willingness to pay is too low and firm B’s costs are too high, so they do not participate. The maximum total surplus is the area between the demand and supply curves, which totals $11 ($8 value minus $2 cost for the first haircut, plus $7 value minus $3 cost for the second, plus $5 value minus $4 cost for the third).Figure 139. a. The effect of falling production costs in the market for computers results in a shift to the right in the supply curve, as shown in Figure 14. As a result, the equilibrium price of computers declines and the equilibrium quantity increases. The decline in the price of computers increases consumer surplus from area A to A + B + C + D, an increase in the amount B + C + D.Figure 14 Figure 15Prior to the shift in supply, producer surplus was areas B + E (the area above thesupply curve and below the price). After the shift in supply, producer surplus isareas E + F + G. So producer surplus changes by the amount F + G – B, whichmay be positive or negative. The increase in quantity increases producer surplus,while the decline in the price reduces producer surplus. Because consumer surplusrises by B + C + D and producer surplus rises by F + G – B, total surplus rises byC +D + F + G.b. Because typewriters are substitutes for computers, the decline in the price of computers means that people substitute computers for typewriters, shifting the demand for typewriters to the left, as shown in Figure 15. The result is a decline in both the equilibrium price and equilibrium quantity of typewriters. Consumer surplus in the typewriter market changes from area A + B to A + C, a net change of C – B. Producer surplus changes from area C + D + E to area E, a net loss of C + D. Typewriter producers are sad about technological advances in computers because their producer surplus declines.c. Because software and computers are complements, the decline in the price and increase in the quantity of computers means that the demand for software increases, shifting the demand for software to the right, as shown in Figure 16. The result is an increase in both the price and quantity of software. Consumer surplus in the software market changes from B + C to A + B, anet change of A – C. Producer surplus changes from E to C + D + E, an increase of C + D, so software producers should be happy about the technological progress in computers.Figure 16d. Yes, this analysis helps explain why Bill Gates is one the world’s richest people, because his company produces a lot of software that is a complement with computers and there has been tremendous technological advance in computers.10. a. With Provider A, the cost of an extra minute is $0. With Provider B, the cost of anextra minute is $1.b. With Provider A, my friend will purchase 150 minutes [= 150 – (50)(0)]. WithProvider B, my friend would purchase 100 minutes [= 150 – (50)(1)].c. With Provider A, he would pay $120. The cost would be $100 with Provider B.Figure 17d. Figure 17 shows the friend’s demand. With Provider A, he buys 150 minutes andhis consumer surplus is equal to (1/2)(3)(150) – 120 = 105. With Provider B, hisconsumer surplus is equal to (1/2)(2)(100) = 100.e. I would recommend Provider A because he receives greater consumer surplus.11. a. Figure 18 illustrates the demand for medical care. If each procedure has a price of $100, quantity demanded will be Q1 procedures.Figure 18b. If consumers pay only $20 per procedure, the quantity demanded will be Q2 procedures. Because the cost to society is $100, the number of procedures performed is too large to maximize total surplus. The quantity that maximizes total surplus is Q1 procedures, which is less than Q2.c. The use of medical care is excessive in the sense that consumers get procedures whose value is less than the cost of producing them. As a result, the economy’s total surplus is reduced.d. To prevent this excessive use, the consumer must bear the marginal cost of the procedure. But this would require eliminating insurance. Another possibility would be that the insurance company, which pays most of the marginal cost of the procedure ($80, in this case) could decide whether the procedure should be performed. But the insurance company does not get the benefits of the procedure, so its decisions may not reflect the value to the consumer.。

西方经济学第9章(微观第9章)一、问答题1.试述消费者的要素供给原则。

答：（1）要素供给者（消费者）遵循的是效用最大原则，即作为“要素供给的资源的边际效用要与作为”保留自用“的资源的边际效用相等。

（2）要素供给的边际效用是间接的等于要素供给的边际收入与收入的边际效用的乘积。

（3）自用资源的边际效用是直接边际效用增量与自用资源增量之比的极限值，即增加一单位自用资源带来的效用增量。

2.如何从要素供给原则推导要素供给曲线？答（1）根据要素供给原则dU/dL\dL/dY=W,给定一个要素价格W，可以得到一个最优的自用资源数量L。

（2）在资源总量为既定的条件下，给定一个最优的自用资源数量L,又可以得到一个最优的要素供给量L。

（3）要素价格W与要素供给量L的关系即代表了要素的供给曲线。

3.劳动供给曲线为什么向后弯曲？答：（1）劳动供给曲线表明的是劳动供给量与价格之间的关系，而劳动供给可看成成本是闲暇需求的反面；劳动的价格即工资是闲暇的价格。

于是，劳动供给量随工资的变化的关系即劳动供给曲线可以用闲暇需求量随闲暇价格变化的关系即闲暇需求的曲线来说明：解释劳动供给曲线向后弯曲（劳动供给量随工资上升而下降）等于解释闲暇需求曲线向前上斜（闲暇需求量随闲暇价格上升而上升）。

（2）闲暇价格变化造成闲暇需求量变化有两个原因，即替代效应和收入效应。

由于替代效应，闲暇需求量与闲暇价格变化方向相反。

由于收入效应，闲暇需求量与闲暇价格变化方向相同。

（3）当工资即闲暇价格较低时，闲暇价格变化的收入效应较小，而当工资即闲暇价格越高时，闲暇价格变化的收入效应就越大，甚至可能超过替代效应。

如果收入效应超过了替代效应，则闲暇需求量随闲暇价格上升而上升，即劳动供给量随工资上升而下降，这就使得劳动供给曲线向后弯曲。

4.土地的供给曲线为什么垂直？答：土地供给曲线垂直并非因为自然赋予的土地数量为（或假定为）固定不变。

而是因为假定土地只有一种用途即生产性用途，而没有自用用途。

微观经济学Chapter91、Why does economic theory predict that the perfectly competitive firm will produce at the point where price equals marginal cost?A. Because this point maximizes profit for the firm.B. Because this point provides an efficient allocation of society's resources.C. Because this point results in zero economic profit.D. Because this point will minimize ATC for the firm.--------------------------------------------------------------------------------2、How does the long run differ from the short run in perfect competition?A. The long run is long enough to allow for the entry of new firms into the industry.B. In the long run, some firms will charge higher prices than others.C. In the short run, the firm seeks to maximize profit; it the long run it seeks to maximize revenue.D. In the short run, the firm seeks to maximize profit; it the long run it seeks to minimize cost.--------------------------------------------------------------------------------3、Luis operates a cherry orchard in Northern Oregon and sells the cherries in a perfectly competitive market at a price of $1.70 per pound. Last month Luis sold 2,000 pounds of cherries. His fixed cost of production was $800 and his average variable cost was $1.00 per pound. What was his profit?A. $600B. $800C. $3,400D. $2,600--------------------------------------------------------------------------------4、Nadia operates a frame shop and charges the perfectly competitive price of $65 for custom framing of a standard size picture. She is a price-taking producer. In order to maximize her profit, Nadia willA. accept framing orders up until the point where the marginal cost of doing so is $65.B. seek to operate at the minimum point on her marginal cost curve.C. seek to operate at the minimum point on her average variable cost curve.D. seek to produce at the point where her average variable cost is $65.--------------------------------------------------------------------------------5、In maximizing net gains, the perfectly competitive firm will seek toA. maximize profit.B. minimize average variable cost.C. minimize marginal cost.D. minimize average total cost.--------------------------------------------------------------------------------6、Which of the following is NOT a characteristic of a perfectly competitive industry?A. Each firm seeks to undercut the price of its competitors.B. There is easy entry and exit.C. Each firm is a price-taking producer.D. Each firm has a small share of the market.--------------------------------------------------------------------------------7、The quantity supplied by a perfectly competitive firm at a given market price is determined byA. the firm's marginal cost curve.B. the firm's average total cost curve.C. the number of firms in the market.D. the firm's marginal revenue curve.--------------------------------------------------------------------------------8、A perfectly competitive firm is currently selling its product at the market price of $6. Its average fixed cost is $0.75 and its average total cost is $5.50. How much would the market price have to decline in order for the firm to choose to shut down in the short run?A. The price would have to fall below $5.50.B. The price would have to fall below $4.75.C. The firm should shut down now, at the price of $6.00D. The price would have to fall below $0.75--------------------------------------------------------------------------------9、For the perfectly competitive firm, economic profit equalsA. (price - average variable cost) x quantity.B. (price-marginal cost) x quantity.C. total revenue - total fixed cost.D. (price - average total cost) x quantity.--------------------------------------------------------------------------------10、The short-run individual supply curve of the perfectly competitive firm isA. its average total cost curve.B. its marginal cost curve above average variable cost.C. the upward-sloping portion of its average variable cost curve.D. its marginal cost curve above average total cost.--------------------------------------------------------------------------------11、Suppose that firms in the perfectly competitive potato-growing industry are earning economic profits. According to economic theory, what is likely to happen?A. The existence of profits will lead to a drop in the demand for potatoes.B. More firms will enter the market, thereby decreasing the industry supply and raising the market priceC. The costs of the firms will increase, eventually eliminating the profit.D. More firms will enter the market, thereby increasing the industry supply and lowering the market price.--------------------------------------------------------------------------------12、A perfectly competitive firm is charging the market price of $18 to sell its product. The firm is producing and selling the profit-maximizing quantity of 50 units at this price. Its average total cost is $17 and its average variable cost is $15. Which of the following statements is then TRUE?A. This firm should shut down now.B. At this current level of production, the firm's marginal cost is $17.C. At this current level of production, the firm's marginal cost is $15.D. The firm is earning an economic profit of $50.--------------------------------------------------------------------------------13、How does the long-run industry supply curve compare to the short-run industry supply curve?A. The short-run curve is based on the assumption that firms can control the price they charge, whereas the long-run curve assumes that the market sets the price.B. The long-run curve is always steeper than the short-run curve.C. The long-run curve is based on the assumption that firms can control the price they charge, whereas the short-run curve assumes that the market sets the price.D. The long-run curve is always flatter than the short-run curve.--------------------------------------------------------------------------------14、The existence of profit in a perfectly competitive industry means thatA. each producer is charging a different price.B. consumers will switch to substitute goods.C. the current price exceeds marginal cost.D. new producers will seek to enter the industry.--------------------------------------------------------------------------------15、Suppose that the long-run industry supply in the production of synthetic fabrics is perfectly elastic. Which of the following statements then is TRUE?A. The existence of profit within the industry will not draw new firms into the market.B. The long-run industry supply for synthetics is upward-sloping.C. The marginal cost curve of each synthetic-producing firm is horizontal.D. The long-run industry supply for synthetics is horizontal.--------------------------------------------------------------------------------16、Which of the following is NOT a characteristic of the long-run equilibrium in perfect competition?A. Price equals ATC for each firm.B. Each firm is producing an efficient quantity.C. Each firm is producing at the minimum point on the MC curve..D. Each firm is earning zero economic profit.--------------------------------------------------------------------------------17、A firm will choose to shut down in the short run whenA. marginal cost begins to increase.B. price is below the minimum point of A VC.C. total revenue is not sufficient to cover total cost.D. price is above the minimum point of A VC but below the minimum point of ATC.--------------------------------------------------------------------------------18、A perfectly competitive firm earns an economic profit whenA. price is above average total cost.B. price is above average variable cost.C. total variable cost exceeds total revenue.D. total cost exceeds total revenue.--------------------------------------------------------------------------------19、Tara sells her organic carrots in a perfectly competitive market for a price that is just higher than her minimum average variable cost of production, but lower than her minimum average total cost of production. Which of the following statements is then TRUE?A. She is incurring a loss, because price is less than A TC.B. She is earning a profit, because price is above A VC.C. She can minimize her losses by shutting down her operations now.D. Although she is currently incurring a loss, she could restore profitability by advertising her carrots.--------------------------------------------------------------------------------20、Gabriel operates a tree-trimming business in Maine. He charges the perfectly competitive price of $47 per hour. The marginal cost of working the 36th hour each week is $42; the marginal cost of working the 37th hour is $44; of the 38th hour is $46; and of the 39th hour is $48. How many hours should he work each week?A. He should work 36 hours per week, because the marginal cost of working rises after this point.B. He should work 38 hours per week, because this is the workload that maximizes his net gain.C. He should work 39 hours per week, because he would have to lower his price if her wanted to work more than that.D. He should work 40 hours per week, because he can always earn more revenue by working more.。

Managerial EconomicsPart 1：1。

The price of good A goes up。

As a result the demand for good B shifts to the left. From this we can infer that：a. good A is a normal good。

b。

good B is an inferior good。

c。

goods A and B are substitutes。

d。

goods A and B are complements.e. none of the above。

Choose： d） the definition os complements2。

Joe’s budget line is 15F + 45C = 900. When Joe chooses his most preferred market basket, he buys 10 units of C. therefore， he also buys ：a。

10 units of F b。

30 units of F c。

50 units of Fd. 60 units of F e。

None of the aboveChoose： b) We assume that Joe will spend all his income。

If C = 10, then 15F =900 – 45（10） =450, so F = 450/15 =30.3. Kim only buys coffee and compact discs。

Coffee costs $0.60 per cup， and CDs cost $12。

00 each。

She has ＄18 per week to spend on these two goods。

If Kim is maximizing her utility， her marginal rate of substitution of coffee for CDs is: a. 0。

CHAPTER 9THE ANALYSIS OF COMPETITIVE MARKETSTEACHING NOTESNow that students understand supply and demand more deeply, Chapter 9 shows how supply-demand analysis can be applied to a wide variety of economic issues and policies. In a sense, Chapter 9 picks up where Chapter 2 left off, but in more detail. The chapter begins with a review of consumer and producer surplus in Section 9.1. If you have postponed these topics, you should carefully explain the definition of each.It is crucial for students to understand that the surplus measures are in dollars, which makes it possible to compare them and add or subtract them. I like to impress on students that it is kind of remarkable that we are able to measure a consumer’s gain or loss of utility in dollars, but that that is exactly what consumer surplus does. Some students are more accepting of using consumer surplus as a measure of consumer welfare once they understand it is related to utility.Another point you might want to stress is that the change in consumer surplus found from a market demand curve implicitly adds all the consumers’ surpluses together, and this may mask how various subgroups do. If policy makers care more about certain groups, such as poor consumers, than others, an aggregate measure of consumer welfare may not tell the entire welfare story.Some students may still be a bit perplexed about producer surplus too. It is worth reiterating that producer surplus is revenue minus total variable cost, so it is different from profit in the short run. However, we are usually interested in the change in producer surplus. Since fixed costs do not change in the short run, the change in producer surplus is the change in profit. Profit is a more concrete concept than the nebulous producer surplus, so recognizing this connection can aid student understanding and acceptance of the change in producer surplus as a measure of welfare change. As with consumer surplus, when the change in producer surplus is calculated from a market supply curve, the effects on different subgroups (large and small farmers, for example) are obscured.Section 9.2 describes the basic concept of efficiency in competitive markets but also discusses situations of market failure in which the competitive outcome is not efficient. Market failure is studied in much greater detail in the last two chapters of the book, but it is useful to introduce the idea here, especially if you do not plan to cover it later. Students are very attuned to issues such as pollution, and they will find this topic interesting and important. Also, if you do not bring this up, some perceptive students probably will, so you might as well beat them to it. If you want to spark a lively discussion, you can ask students about the market for human kidneys covered in Example 9.2.Sections 9.3 to 9.6 present examples of government policies that cause the market equilibrium to differ from the competitive, efficient equilibrium. You can pick and choose among the topics covered – minimum prices in Section 9.3, price supports and production quotas in 9.4, import quotas and tariffs in 9.5, and taxes and subsidies in 9.6 – depending on time constraints and personal preference. The presentation in each of these sections follows the same format: there is a general discussion of why market intervention leads to deadweight loss, followed by the presentation of an important policy example.The method used to determine the incidence of a tax or subsidy in Section 9.6 is a little different from many other textbooks. The typical method for, say, a specific tax levied on producers, is to add the tax to the industry supply curve so that the industry supply shifts upward by the amount of the tax. In this text, however, the effect is found by finding the point where the vertical difference between the supply and demand curves equals the tax. No curves are shifted. You might want to do it the other way also, because the book’s method is a bit more abstract. Once students catch on, however, it is actually an easy method to use, and it has the added advantage that there are no new supply or demand curves to contend with when it comes time to calculate the changes in consumer and producer surplus.Each of the last four sections is covered in one review question and applied in at least one exercise at the end of the chapter. Exercise 1 focuses on minimum wages; Exercises 4 and 5 reinforce discussion of price supports and production quotas; tariffs and quotas can be found in Exercises 3, 6, 7, 8, 11 and 12. Taxes and subsidies are discussed in Exercises 2, 9 and 14; Exercise 10 considers natural gas price controls (based on Example 9.1, which is a continuation of Example 2.7). Exercise 4 may be compared to Example 9.4 and discussed as an extension of Example 2.2.REVIEW QUESTIONS1. What is meant by deadweight loss? Why does a price ceiling usually result in a deadweight loss?Deadweight loss refers to the benefits lost by consumers and/or producers whenmarkets do not operate efficiently. The term deadweight denotes that these arebenefits unavailable to any party. A price ceiling set below the equilibrium price in aperfectly competitive market will result in a deadweight loss because it reduces thequantity supplied by producers. Both producers and consumers lose surplus becauseless of the good is produced and consumed. The reduced (ceiling) price benefitsconsumers but hurts producers, so there is a transfer from one group to the other. Thereal culprit, then, and the primary source of the deadweight loss, is the reduction in theamount of the good in the market.2. Suppose the supply curve for a good is completely inelastic. If the government imposeda price ceiling below the market-clearing level, would a deadweight loss result? Explain.When the supply curve is completely inelastic, it is vertical. In this case there is nodeadweight loss because there is no reduction in the amount of the good produced. Theimposition of the price ceiling transfers all lost producer surplus to consumers.Consumer surplus increases by the difference between the market-clearing price andthe price ceiling times the market-clearing quantity. Consumers capture all decreasesin total revenue, and no deadweight loss occurs.3. How can a price ceiling make consumers better off? Under what conditions might it make them worse off?If the supply curve is highly inelastic a price ceiling will usually increase consumersurplus because the quantity available will not decline much, but consumers get topurchase the product at a reduced price. If the demand curve is inelastic, on the otherhand, price controls may result in a net loss of consumer surplus because consumerswho value the good highly are unable to purchase as much as they would like. (SeeFigure 9.3 on page 313 in the text.) The loss of consumer surplus is greater than thetransfer of producer surplus to consumers. So consumers are made better off whendemand is relatively elastic and supply is relatively inelastic, and they are made worseoff when the opposite is true.4. Suppose the government regulates the price of a good to be no lower than some minimum level. Can such a minimum price make producers as a whole worse off? Explain.With a minimum price set above the market-clearing price, some consumer surplus istransferred to producers because of the higher price, but some producer surplus is lostbecause consumers purchase less. If demand is highly elastic, the reduction inpurchases can offset the higher price producers receive, making producers worse off. Inthe diagram below, the market-clearing price and quantity are P0 and Q0. Theminimum price is set at P′, and at this price consumers demand Q′. Assuming thatsuppliers produce Q′ (and not the larger quantity indicated by the supply curve),producer surplus increases by area A due to the higher price, but decreases by themuch larger area B because the quantity demanded drops sharply.The result is a reduction in producer surplus. Note that if suppliers produce more thanQ′, the loss in producer surplus is even greater.5. How are production limits used in practice to raise the prices of the following goods or services: (a) taxi rides, (b) drinks in a restaurant or bar, (c) wheat or corn?Municipal authorities usually regulate the number of taxis through the issuance oflicenses or medallions. When the number of taxis is less than it would be withoutregulation, those taxis in the market may charge a higher-than-competitive price.State authorities usually regulate the number of liquor licenses. By requiring that anybar or restaurant that serves alcohol have a liquor license and then limiting thenumber of licenses available, the state limits entry by new bars and restaurants. Thislimitation allows those establishments that have a license to charge a higher-than-competitive price for alcoholic beverages.Federal authorities usually regulate the number of acres of wheat or corn in productionby creating acreage limitation programs that give farmers financial incentives to leavesome of their acreage idle. This reduces supply, driving up the price of wheat or corn.6. Suppose the government wants to increase farmers’ incomes. Why do price supports or acreage-limitation programs cost society more than simply giving farmers money?Price supports and acreage limitations cost society more than the dollar cost of theseprograms because the higher price that results in either case will reduce quantitydemanded and hence consumer surplus, leading to a deadweight loss because farmersare not able to capture the lost surplus. Giving farmers money does not result in anydeadweight loss but is merely a redistribution of surplus from one group to the other.7. Suppose the government wants to limit imports of a certain good. Is it preferable to use an import quota or a tariff? Why?Changes in domestic consumer and producer surpluses are the same under importquotas and tariffs. There will be a loss in (domestic) total surplus in either case.However, with a tariff, the government can collect revenue equal to the tariff times thequantity of imports, and these revenues can be redistributed in the domestic economyto offset some of the domestic deadweight loss. Thus, there is less of a loss to thedomestic society as a whole with a tariff. With an import quota, foreign producers cancapture the difference between the domestic and world price times the quantity ofimports. Therefore, with an import quota, there is a loss to the domestic society as awhole. If the national government is trying to minimize domestic welfare loss, itshould use a tariff.8. The burden of a tax is shared by producers and consumers. Under what conditions will consumers pay most of the tax? Under what conditions will producers pay most of it? What determines the share of a subsidy that benefits consumers?The burden of a tax and the benefits of a subsidy depend on the elasticities of demandand supply. If the absolute value of the ratio of the elasticity of demand to theelasticity of supply is small, the burden of the tax falls mainly on consumers. If theratio is large, the burden of the tax falls mainly on producers. Similarly, the benefit ofa subsidy accrues mostly to consumers (producers) if the ratio of the elasticity ofdemand to the elasticity of supply is small (large) in absolute value.9. Why does a tax create a deadweight loss? What determines the size of this loss?A tax creates deadweight loss by artificially increasing price above the free marketlevel, thus reducing the equilibrium quantity. This reduction in quantity reducesconsumer as well as producer surplus. The size of the deadweight loss depends on theelasticities of supply and demand and on the size of the tax. The more elastic supplyand demand are, the larger will be the deadweight loss, and the larger the tax, thegreater the deadweight loss.EXERCISES1. In 1996, Congress raised the minimum wage from $4.25 per hour to $5.15 per hour, and then raised it again in 2007. (See Example 1.3 [page 13].) Some people suggested that a government subsidy could help employers finance the higher wage. This exercise examines the economics of a minimum wage and wage subsidies. Suppose the supply of low-skilled labor is given by L S = 10w, where L S is the quantity of low-skilled labor (in millions of persons employed each year), and w is the wage rate (in dollars per hour). The demand for labor is given by L D = 80 – 10w.a.What will be the free-market wage rate and employment level? Suppose thegovernment sets a minimum wage of $5 per hour. How many people would then be employed?In a free-market equilibrium, L S = L D. Solving yields w = $4 and L S = L D= 40. If theminimum wage is $5, then L S = 50 and L D = 30. The number of people employed willbe given by the labor demand, so employers will hire only 30 million workers. ArrayLb.Suppose that instead of a minimum wage, the government pays a subsidy of $1 perhour for each employee. What will the total level of employment be now? What will the equilibrium wage rate be?Let w s denote the wage received by the sellers (i.e., the employees), and w b the wagepaid by the buyers (the firms). The new equilibrium occurs where the verticaldifference between the supply and demand curves is $1 (the amount of the subsidy).This point can be found whereL D(w b) = L S(w s), andw s – w b = 1.Write the second equation as w b= w s– 1. This reflects the fact that firms pay $1 lessthan the wage received by workers because of the subsidy. Substitute for w b in thedemand equation: L D(w b) = 80 – 10(w s– 1), soL D(w b) = 90 – 10w s.Note that this is equivalent to an upward shift in demand by the amount of the $1subsidy. Now set the new demand equal to supply: 90 – 10w s= 10w s. Therefore, w s=$4.50, and L D = 90 – 10(4.50) = 45. Employment increases to 45 (compared to 30 withthe minimum wage), but wage drops to $4.50 (compared to $5.00 with the minimumwage). The net wage the firm pays falls to $3.50 due to the subsidy.L2. Suppose the market for widgets can be described by the following equations:Demand: P = 10 – Q Supply: P = Q – 4where P is the price in dollars per unit and Q is the quantity in thousands of units. Then:a.What is the equilibrium price and quantity?Equate supply and demand and solve for Q: 10 – Q = Q – 4. Therefore Q = 7 thousandwidgets.Substitute Q into either the demand or the supply equation to obtain P.P = 10 – 7 = $3.00,orP = 7 – 4 = $3.00.b.Suppose the government imposes a tax of $1 per unit to reduce widget consumptionand raise government revenues. What will the new equilibrium quantity be? What price will the buyer pay? What amount per unit will the seller receive?With the imposition of a $1.00 tax per unit, the price buyers pay is $1 more than theprice suppliers receive. Also, at the new equilibrium, the quantity bought must equalthe quantity supplied. We can write these two conditions asP b – P s= 1Q b = Q s.Let Q with no subscript stand for the common value of Q b and Q s. Then substitute thedemand and supply equations for the two values of P:(10 – Q) – (Q – 4) = 1Therefore, Q = 6.5 thousand widgets. Plug this value into the demand equation, whichis the equation for P b, to find P b = 10 – 6.5 = $3.50. Also substitute Q = 6.5 into thesupply equation to get P s = 6.5 – 4 = $2.50.The tax raises the price in the market from $3.00 (as found in part a) to $3.50. Sellers,however, receive only $2.50 after the tax is imposed. Therefore, the tax is sharedequally between buyers and sellers, each paying $0.50.c.Suppose the government has a change of heart about the importance of widgets tothe happiness of the American public. The tax is removed and a subsidy of $1 per unit granted to widget producers. What will the equilibrium quantity be? What price will the buyer pay? What amount per unit (including the subsidy) will the seller receive? What will be the total cost to the government?Now the two conditions that must be satisfied areP s – P b = 1Q b = Q s.As in part (b), let Q stand for the common value of quantity. Substitute the supply anddemand curves into the first condition, which yields(Q – 4) – (10 – Q) = 1.Therefore, Q = 7.5 thousand widgets. Using this quantity in the supply and demandequations, suppliers will receive P s = 7.5 – 4 = $3.50, and buyers will pay P b = 10 – 7.5= $2.50. The total cost to the government is the subsidy per unit multiplied by thenumber of units. Thus, the cost is ($1)(7.5) = $7.5 thousand, or $7500.3. Japanese rice producers have extremely high production costs, due in part to the high opportunity cost of land and to their inability to take advantage of economies of large-scale production. Analyze two policies intended to maintain Japanese rice production: (1) a per-pound subsidy to farmers for each pound of rice produced, or (2) a per-pound tariff on imported rice. Illustrate with supply-and-demand diagrams the equilibrium price and quantity, domestic rice production, government revenue or deficit, and deadweight loss from each policy. Which policy is the Japanese government likely to prefer? Which policy are Japanese farmers likely to prefer?We have to make some assumptions to answer this question. If you make differentassumptions, you may get a different answer. Assume that initially the Japanese ricemarket is open, meaning that foreign producers and domestic (Japanese) producersboth sell rice to Japanese consumers. The world price of rice is P W. This price is belowP0, which is the equilibrium price that would occur in the Japanese market if noimports were allowed. In the diagram below, S is the domestic supply, D is thedomestic demand, and Q0 is the equilibrium quantity that would prevail if no importswere allowed. The horizontal line at P W is the world supply of rice, which is assumed tobe perfectly elastic. Initially Japanese consumers purchase Q D rice at the world price.Japanese farmers supply Q S at that price, and Q D – Q S is imported from foreignproducers.Now suppose the Japanese government pays a subsidy to Japanese farmers equal tothe difference between P0 and P W. Then Japanese farmers would sell rice on the openmarket for P W plus receive the subsidy of P0 – P W. Adding these together, the totalamount Japanese farmers would receive is P0per pound of rice. At this price theywould supply Q0 pounds of rice. Consumers would still pay P W and buy Q D. Foreignsuppliers would import Q D – Q0 pounds of rice. This policy would cost the government(P0 – P W)Q0, which is the subsidy per pound times the number of pounds supplied byJapanese farmers. It is represented on the diagram as areas B + E. Producer surplusincreases from area C to C + B, so ΔPS = B. Consumer surplus is not affected andremains as area A + B + E + F. Deadweight loss is area E, which is the cost of thesubsidy minus the gain in producer surplus.Instead, suppose the government imposes a tariff rather than paying a subsidy. Letthe tariff be the same size as the subsidy, P0 –P W. Now foreign firms importing riceinto Japan will have to sell at the world price plus the tariff: P W + (P0 –P W) = P0. Butat this price, Japanese farmers will supply Q0, which is exactly the amount Japaneseconsumers wish to purchase. Therefore, there will be no imports, and the governmentwill not collect any revenue from the tariff. The increase in producer surplus equalsarea B, as it is in the case of the subsidy. Consumer surplus is area A, which is lessthan it is under the subsidy because consumers pay more (P0) and consume less (Q0).Consumer surplus decreases by B + E + F. Deadweight loss is E + F, which is thedifference between the decrease in consumer surplus and the increase in producersurplus.Under the assumptions made here, it seems likely that producers would not have astrong preference for either the subsidy or the tariff, because the increase in producersurplus is the same under both policies. The government might prefer the tariffbecause it does not require any government expenditure. On the other hand, the tariffcauses a decrease in consumer surplus, and government officials who are elected byconsumers might want to avoid that. Note that if the subsidy and tariff amounts weresmaller than assumed above, some tariffs would be collected, but we would still get thesame basic results.4. In 1983, the Reagan Administration introduced a new agricultural program called the Payment-in-Kind Program. To see how the program worked, let’s consider the wheat market.a.Suppose the demand function is Q D = 28 – 2P and the supply function is Q S = 4 + 4P,where P is the price of wheat in dollars per bushel, and Q is the quantity in billions of bushels. Find the free-market equilibrium price and quantity.Equating demand and supply, Q D = Q S,28 – 2P = 4 + 4P, or P = $4.00 per bushel.To determine the equilibrium quantity, substitute P = 4 into either the supply equationor the demand equation:Q S = 4 + 4(4) = 20 billion bushels,orQ D = 28 – 2(4)= 20 billion bushels.b.Now suppose the government wants to lower the supply of wheat by 25 percent fromthe free-market equilibrium by paying farmers to withdraw land from production.However, the payment is made in wheat rather than in dollars – hence the name of the program. The wheat comes from vast government reserves accumulated from previous price support programs. The amount of wheat paid is equal to the amount that could have been harvested on the land withdrawn from production. Farmers are free to sell this wheat on the market. How much is now produced by farmers?How much is indirectly supplied to the market by the government? What is the new market price? How much do farmers gain? Do consumers gain or lose?►Note: The answer at the end of the book (first printing) calculates the farmers’ gainincorrectly. The correct cost saving and gain is given below.Because the free-market supply by farmers is 20 billion bushels, the 25-percentreduction required by the new Payment-In-Kind (PIK) Program means that thefarmers now produce 15 billion bushels. To encourage farmers to withdraw their landfrom cultivation, the government must give them 5 billion bushels of wheat, which theysell on the market.Because the total quantity supplied to the market is still 20 billion bushels, the marketprice does not change; it remains at $4 per bushel. Farmers gain because they incur nocosts for the 5 billion bushels received from the government. We can calculate thesecost savings by taking the area under the supply curve between 15 and 20 billionbushels. These are the variable costs of producing the last 5 billion bushels that are nolonger grown under the PIK Program. To find this area, first determine the priceswhen Q = 15 and when Q = 20. These values are P = $2.75 and P = $4.00. The totalcost of producing the last 5 billion bushels is therefore the area of a trapezoid with abase of 20 – 15 = 5 billion and an average height of (2.75 + 4.00)/2 = 3.375. The area is5(3.375) = $16.875 billion.The PIK program does not affect consumers in the wheat market, because theypurchase the same amount at the same price as they did in the free-market case.c.Had the government not given the wheat back to the farmers, it would have storedor destroyed it. Do taxpayers gain from the program? What potential problems does the program create?Taxpayers gain because the government does not incur costs to store or destroy thewheat. Although everyone seems to gain from the PIK program, it can only last whilethere are government wheat reserves. The PIK program assumes that the landremoved from production may be restored to production when stockpiles of wheat areexhausted. If this cannot be done, consumers may eventually pay more for wheat-based products.5.About 100 million pounds of jelly beans are consumed in the United States each year, and the price has been about 50 cents per pound. However, jelly bean producers feel that their incomes are too low and have convinced the government that price supports are in order. The government will therefore buy up as many jelly beans as necessary to keep the price at $1 per pound. However, government economists are worried about the impact of this program because they have no estimates of the elasticities of jelly bean demand or supply.a.Could this program cost the government more than $50 million per year? Underwhat conditions? Could it cost less than $50 million per year? Under what conditions? Illustrate with a diagram.If the quantities demanded and supplied are very responsive to price changes, then agovernment program that doubles the price of jelly beans could easily cost more than$50 million. In this case, the change in price will cause a large change in quantitysupplied, and a large change in quantity demanded. In Figure 9.5.a.i, the cost of theprogram is ($1)(Q S –Q D). If Q S –Q D is larger than 50 million, then the government willpay more than $50 million. If instead supply and demand were relatively priceinelastic, then the change in price would result in small changes in quantity suppliedand quantity demanded, and (Q S –Q D) would be less than $50 million as illustrated inFigure 9.5.a.ii.QQ S Q D 1.00.50100SFigure 9.5.a.iWe can determine the combinations of supply and demand elasticities that yield either result. The elasticity of supply is E S = (%ΔQ S )/(%ΔP), so the percentage change in quantity supplied is %ΔQ S = E S (%ΔP). Since the price increase is 100 percent (from $0.50 to $1.00), %ΔQ S = 100E S . Likewise, the percentage change in quantity demanded is %ΔQ D = 100E D . The gap between Q D and Q S in percentage terms is %ΔQ S – %ΔQ D = 100E S –100E D = 100(E S – E D ). If this gap is exactly 50 percent of the current 100 million pounds of jelly beans, the gap will be 50 million pounds, and the cost of the price support program will be exactly $50 million. So the program will cost $50 million if 100(E S – E D ) = 50, or (E S – E D ) = 0.5. If the difference between the elasticities is greater than one half, the program will cost more than $50 million, and if the difference is less than one half, the program will cost less than $50 million. So the supply and demand can each be fairly inelastic (for example, 0.3 and –0.4) and still trigger a cost greater than $50 million.Q PQ S Q D 1.00.50100Figure 9.5.a.iib. Could this program cost consumers (in terms of lost consumer surplus) more than $50 million per year? Under what conditions? Could it cost consumers less than $50million per year? Under what conditions? Again, use a diagram to illustrate.When the demand curve is perfectly inelastic, the loss in consumer surplus is $50 million, equal to ($0.50)(100 million pounds). This represents the highest possible lossin consumer surplus, so the loss cannot be more than $50 million per year. If the demand curve has any elasticity at all, the loss in consumer surplus will be less then $50 million. In Figure 9.5.b, the loss in consumer surplus is area A plus area B if thedemand curve is the completely inelastic D and only area A if the demand curve is D ′.Q100.50Figure 9.5.b。