ࡱ> E@ 9bjbj `1ttttttt,*,*,*,*4`*dP*****~~~ύээээээ$RXt~=i~~~tt**m> ~t*t*ύ~ύ$݃rTtt** Srk,*qӌ 0P7xttttt<~~~~~~~(,* ,*Economics 160 STUDY QUESTIONS ON CONSUMER AND PRODUCER SURPLUS 1. What does consumer surplus measure? How is it calculated? 2. If Bob is willing to pay up to $100 for a ticket to a concert, but actually pays $60, then what is his consumer surplus? 3. Assume the following total value schedule for some consumer. Fill in the MV column in the table below. Q Total Value (TV) Marginal Value (MV) 1 $10 ---- 2 $19 3 $27 $34 $40 $45 $49 $52 $54 a. Derive this consumers demand curve (that is, graph it). Assume the price of this good is $6. To maximize consumer surplus, a consumer would purchase how many units? What is consumer surplus at this quantity? Show consumer surplus on your graph. 4. See Figure 1. If the price is $10, then what is consumer surplus? What is consumer surplus at a price of $8?  Price FIGURE 1.  $30 $10 $8  100 120 Quantity 5. What does producer surplus measure? How is it calculated? 6. Firm A faces the following total cost schedule. Fill in the MC column. Q Total Cost (TC) Marginal Cost (MC) 0 0 ---- $1 $3 $6 $10 $15 $21 $28 $36 $45 a. Using the information from the table, derive the supply curve. b. If the price of the good was $4, how units would be produced? What would producer surplus be at this quantity? Show producer surplus on your graph. 7. See Figure 2. What is producer surplus at P = $10? What is producer surplus at P = $18?  FIGURE 2. Price Supply   $18 $10  $2  10 20 Quantity 8. See Figure 3. Find consumer surplus, producer surplus, and total surplus.  Figure 3.  Price  A Supply  P1 B Demand C  Q1 Quantity 9. Using the information in Figure 4, fill in the table below.  Price Figure 4.  A Supply  B C  P1 D E  F G H Demand  Q0 Q1 Quantity At Quantity of Q1 At Quantity of Q0 (at same price of P1) Change CS PS Total Surplus What happens to total surplus? 10. See Figure 5. Before taxes, the price is P1. After tax, the price paid by consumers and received by sellers is listed below. Fill in the table below.  Price Figure 5.  A Supply  Price paid by Consumers B C  P1 D E Price received by Sellers F G H Demand  Q0 Q1 Quantity At Quantity of Q1 At Quantity of Q0 Change CS . PS . Government tax revenue . Total Surplus Is there a deadweight loss? 11. Initially, Country A neither exports nor imports any sugar. The initial price and quantity in Country A are P1 and Q1, respectively. Country A now decides to allow exports or imports of sugar. The world price of sugar is P* which is below P1. a. Draw the relevant supply and demand graph corresponding to the information given above. b. Using a table, show the impact that trade has on CS, PS, and total surplus. c. Suppose the government decides to impose a tariff on imported sugar. Draw a new supply and demand graph that illustrates this new situation. Use a table to show the impact on CS, PS, government tariff revenue, and total surplus. ANSWERS 1. CS measures the net gains from trade to consumers. It is measured by taking the difference between what a consumer is willing to pay for a certain number of units and what the consumer actually pays for those units. More formally, CS = TV PQ. 2. CS = $100-$60 = $40. 3. Q Total Value (TV) Marginal Value (MV) 1 $10 $10 2 $19 $9 3 $27 $8 $34 $7 $40 $6 $45 $5 $49 $4 $52 $3 $54 $2  Price  CS = shaded areas = $4+$3+$2 + $1 = $10  $10   $9   $8  $7   Price= $6  $5  $4  $3  $2  Demand Curve (=marginal value curve)  $1 1 2 3 4 5 6 7 8 9 10 Quantity 4. CS = ( 30-10)(100)= $1000 at a price of $10. CS= (30-8)(120)=$1320. 5. PS is a measure of net gains from trade to sellers. PS = PQ TC. 6. Q Total Cost (TC) Marginal Cost (MC) 0 0 ---- 1 $1 $1 2 $3 $2 3 $6 $3 4 $10 $4 5 $15 $5 6 $21 $6 7 $28 $7 8 $36 $8 9 $45 $9 Price  Supply Curve  PS= shaded areas = $3+$2+$1=$6.  $9  $8  $7  $6  $5 Price=$4   $3   $2  $1  1 2 3 4 5 6 7 8 9 Quantity 7. PS = (10-2)(10)= $40 at a price of $10. PS = (18-2)(20)= $160 at a price of $18. 8. CS = area A, PS = area B, and total surplus is A+B. 9. At Quantity of Q1 At Quantity of Q0 Change CS A+B+C A+B -C PS D+E+F D+F -E Total Surplus A+B+C+D+E+F A+B+D+F -(C+E) What happens to total surplus? Total surplus falls by C+E. 10. At Quantity of Q1 At Quantity of Q0 Change CS A+B+C A -(B+C) . PS D+E+F F -(D+E) . Government tax revenue 0 B+D +(B+D) . Total Surplus A+B+C+D+E+F A+B+D+F -(C+E) Deadweight loss = C+E. 11. Before Trade After Trade Change CS A A+B+C+D +(B+C+D) PS B+E E -B . Total Surplus A+B+E A+B+C+D+E +(C+D)  Price   Sdomestic A  P1 B C D  Pworld E Ddomestic  Qs Q1 Qd Quantity 11c. Before Program After Program Change = After minus Before CS A+B+C+D+E+F A+B -(C+D+E+F) . PS (domestic) G C+G +C . Rev. to 0 E +E Government . Total Surplus -DF  P   Sdomestic A  P1+T B Pworld' C D E F  P1 Pworld G  Ddomestic imports  after T sQ1dom sQ2dom dQ2dom dQ1domestic  imports before tariff  ?@}~k  1 2  @ ^`beKL  uw:<AQSik~ЪЪЪh{>*CJH* h{CJH* hQCJjhQCJUmHnHu h{>*CJjh{CJUmHnHu h{CJh{hQ h-kh-kh-kC@}g  8 < @ D H L P K        & Fgd-k9  $ % 1 3 4 ~   @ ~ yz ^b & FbwxyK:34tu9:=c  H&)ijjl;KMcfoqOqr#*+Cr !!0!2!7!F!Z![!ȾjhQCJUmHnHu hQCJh{6CJ]h{h{5CJh{h-k5CJjh{CJUmHnHu h{CJH*h{>*CJH* h{CJ h{>*CJ9.M>obO]^z{u        !"#+%=r : _  & F !Z!u!x!!!!!!;"R"S"l""""##:####3$7$p$$ b & F[!\!`!q!u!w!x!y!!!!!!!!!!!!!!!!!"";"="O"R"S"U"g"l"n""""""""##%#7#:#7$p$$$$$%'%J%[%}%%%%%%&+&M&^&&&'ڻڴڮڮڮڮڮڮڮڮڮ hQCJ h{>*CJ!jh{CJH*UmHnHu h{CJH* h{CJH* h{CJjh{CJUmHnHujh-kCJUmHnHuD$$%J%}%%%&M&&&&&&&&&&&&'P'Q'l'm'''''Y^YgdQ''4'C'Q'S'i'l'm'o''''''''''''( ((((5(8(:(;(>(b(e({(~((()))))))*J+K+y+++++++d--!.'...:......꾵꾵ꫤꫤ h#>*CJh#h{>*CJh{>*CJH* h{>*CJ h{CJH*!jh{CJH*UmHnHu h{CJH* h#CJ h{CJjh{CJUmHnHu@'' ((8(;(b(~(((((((O)))5**+J+K++,-d---- 4------------------/...1/2/H/I/K/////.2/3/I/J/K/L/////00I0L0`0e001116171G1I1\1_111&222r33F4444444444\5d55555555555666 6R6S6h6i6q6r6}6~6hyh{B*CJH*phhyh{B*CJph h{H*h{ h{CJ h{>*CJ h{CJH* h{CJH*jh{CJUmHnHu h{CJC/0I0f00001 11111&222r33F4444444444e5 e5f555 66 7 73778v8899~666667 717375777888n8v88888888888888888888888299999ԱԱ h^CJhyh{B*CJH*phhyh{B*CJph h{CJH*hyh{B*CJH*ph h{CJH*jh{CJUmHnHu h{CJ+ 1h/ =!"#$%za3x!tV$d( @@@ NormalCJ_HaJmH sH tH >@> Heading 1$@& 5CJ\DAD Default Paragraph FontViV  Table Normal :V 44 la (k(No List 1 `@}g8<@DHLPK$%134~@~yz ^bwxyK  : 3 4 t u 9 : = c H & ) ij.M>obO]^z{u       !"#+%=r:_Zux;RSl#:37pJ}MPQlm  8 ; b ~  O!!!5""#J#K##$%d%%%%%%%%%%%%%%%%%%%%%/&&&1'2'H'I'K'''''(I(f(((() )))))&***r++F,,,,,,,,,,e-f--- .. / /3//0v00110000000000 0 0 0 0 0 0000000000000000000000000 0 0 0 0 0 0 0 0 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 0 0 0 0  0  0 000000000000000000000000000000000 0 000000000000000000000000000000000000000000000000000000000000000000 00 000000000000000000000000000000000000000000000000000[!'.~69#'),/ b  $'-/e59 !"$%&(*+-.9l!,r$3x!tV$di"`@= =(  HB  C DHB  C DHB  C DNB  S DNB  S DNB  S DNB  S DHB   C DHB   C D*HB   C DqHB   C D+HB  C DNB  S D1NB  S D0NB  S D:NB  S D9NB  S DMNB  S DXNB  S DcNB  S DeNB  S DgNB  S DiNB  S DlHB  C DkNB  S DpHB " C DoNB # S DnNB $ S DmNB % S DLNB & S DWNB ' S DbNB ( S DdNB ) S DfNB * S DhNB + S DjNB , S DoaHB / C D/HB 0 C D3HB 1 C D8HB 2 C D?HB 3 C DKHB 4 C DJHB 5 C DVHB 6 C D`HB 7@ C D.HB 8@ C D2HB 9@ C D7HB :@ C D>HB ;@ C DIHB <@ C DHHB =@ C DUHB >@ C D_HB @@ C D6HB A C D5HB B@ C D=HB C C D<HB D C DGHB E@ C DFHB F@ C DEHB G@ C DTHB H@ C D^HB I C DDHB J C DSHB K C D]HB L@ C DCHB M@ C DBHB N@ C DRHB O@ C D\HB P C DAHB Q C D@HB R C DQHB S C D[HB T@ C DPHB U@ C DZHB V C DOHB W C DYHB X C DHB Y C DHB Z C DHB [ C DNB ^ S DNB _@ S DHB ` C DHB a C D HB b C DHB c C DNB d@ S DNB e S DNB f S DNB g@ S DNB h@ S DHB i C D)HB j C D#NB k@ S D'NB l S D&NB m S D%NB n@ S D$NB o@ S D(HB p C D"HB q C D!HB s C DrHB t C DHB u C DsNB v S DNB w S DNB y S DNB z S DNB { S D}NB | S D{NB } S DyNB ~ S DwNB  S DuNB @ S DNB @ S DNB @ S DNB @ S DNB @ S D|NB @ S DzNB @ S DxNB @ S DvNB @ S DtNB  S DoNB  S DNB  S DNB  S DHB @ C DHB @ C DHB @ C DHB @ C DHB @ C DHB @ C DHB @ C DHB @ C DHB  C DHB  C DHB  C DHB  C DHB @ C DHB @ C D~HB @ C DHB  C D HB  C DHB  C D NB  S DNB  S DNB  S DNB  S D NB  S D HB  C D VB  C D"VB  C D"VB  C D"VB  C D"\B  S D1"NB  S D1\B  S D"bB  c $D1"\B  S D1"\B  S D1"VB  C D"\B  S D"bB  c $D"bB  c $D"\B  S D"\B @ S D"\B  S D"hB  s *D"VB  C D"TB  c $DHB  C DHB  C DHB  C DHB  C DHB  C DHB  C DHB  C DNB  S DNB @ S DNB  S DNB  S Dj  c ,A10%" -d  S &A10%" 4d  S &A10%" ;d  S &A10%" NNB @ S D,B S  ?}1^_bcdK u v : ; jkZ[\]^_uvxyz{|}~;<STlm#$QRmn                8 9 ; < = b c d 2'I'K'''I(J(K(),,,-----......3/4/00000118t t  t t$ X$ tX$ Xt t \ t Gt88t8P t8P8t$ $ tt8t$ $ Bt8 $ t8xtX t[xtZxt_sd dt^ }tYtbt`tc: tgP Ptf P t te n tdn nth tayytqH tptj: tnP Ptm P t tl n tkn nto tiyyt 88t 8P t$ 8t8Tt78t/8t t8t88pt08otPtAn>t@n>t98n=t18n>tn t8nntptC< tB< t:8< t28< tQp&tP prtMptL ptItFtE tD t<8t;8 t48t38 t%p p t8 p tpn tVp tTp \tRptNp\tJ\tG\t=8\t58\t& t8 tWpZ$ tUpZ *tSZp*tOZptKZTtHZ*t>Zt68Z*t,8(,(t'@ (@ t8(@ (t( t8 t)F2t8FFt*xxLt8xt+dt8d8t8ddt$2t#2t"2t8Ht 8tstuteHetHeH tt~ txt}xx tt|C t t{ ]tp= tp=$ t=p t=Yt=Tt=t = tp=p t=ut==t=@ =tz@ =@ t$ tpt ptt 't ty tp]tt[t[p[twp[ptT)ttvttGGtn t tBtx xt x tt$ $ tttxTxtx8 taFtHHtt NttxtT tt  tt tx t  tHttxtHti5itE 5E tE itYZ''_(e(()[)])[-d-../ ///1 |7 < xqcN!!0!2!^!c!!!##y#{#$$$$[%]%%%%&r&t&&&))+E,00n0s0219113333333333333333333333333333333333333? #*027FZ\xy'J[}+M^4C ; ; J#K#!&'&&&1111 Unknown User Unknown User Unknown User Unknown User Unknown User Unknown User Unknown User Unknown User Unknown Useredward mcdevitt9q r| KBiVWZ,%4:\gO?^`?o(^`.L^`L.  ^ `.k k ^k `.;L;^;`L.  ^ `.^`.L^`L.^`o(.^`.pLp^p`L.@ @ ^@ `.^`.L^`L.^`.^`.PLP^P`L.^`o(.^`.bLb^b`L.2 2 ^2 `.  ^ `.L^`L.^`.rr^r`.BLB^B`L. O ^ `Oo(^`.aLa^a`L.1 1 ^1 `.^`.L^`L.^`.qq^q`.ALA^A`L.| K9q :\gVWZDE2                 f&>        *         ~29-ky{Q#8^y11@kk&IIkk1@UnknownGz Times New Roman5Symbol3& z Arial"qh;zNzLjF u*Zu*Z!2411k3QH(?-kConsumer and Producer Surplus Unknown Useredward mcdevitt    Oh+'0 0< X d p |Consumer and Producer Surplusons Unknown UserPronknnkn Normal.dotredward mcdevitt8waMicrosoft Word 10.0@H'@h(z@zG@4w\ku*՜.+,0 hp  DellComputerCorporationZ1 Consumer and Producer Surplus Title  !"#$%&'()*+,-./02345678:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}~Root Entry FlrkData 11Table9WordDocument`SummaryInformation(DocumentSummaryInformation8CompObjj  FMicrosoft Word Document MSWordDocWord.Document.89q