Scribd Logo
Upload

Welcome to Scribd!

  • 17 views

    ECO100 Introduction To Economcs - Tutorial 3

    Uploaded by

    koosalwinner
    This document discusses market efficiency and government intervention through examples like minimum wage, rent control, and tobacco taxes. It contains 9 questions about concepts like consumer and producer surplus, deadweight loss, and how policies like taxes and minimum wages can affect market equilibrium and efficiency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    ECO100 Introduction To Economcs - Tutorial 3

    Uploaded by

    koosalwinner
    17 views2 pages
    This document discusses market efficiency and government intervention through examples like minimum wage, rent control, and tobacco taxes. It contains 9 questions about concepts like consumer and producer surplus, deadweight loss, and how policies like taxes and minimum wages can affect market equilibrium and efficiency.

    Original Title

    ECO100 Introduction to Economcs _Tutorial 3

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses market efficiency and government intervention through examples like minimum wage, rent control, and tobacco taxes. It contains 9 questions about concepts like consumer and producer surplus, deadweight loss, and how policies like taxes and minimum wages can affect market equilibrium and efficiency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    17 views2 pages

    ECO100 Introduction To Economcs - Tutorial 3

    Uploaded by

    koosalwinner
    This document discusses market efficiency and government intervention through examples like minimum wage, rent control, and tobacco taxes. It contains 9 questions about concepts like consumer and producer surplus, deadweight loss, and how policies like taxes and minimum wages can affect market equilibrium and efficiency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 2

    ECO100 INTRODUCTION TO ECONOMICS

    Tutorial Week 3
    Market Efficiency and Government Action

    1. Briefly explain Consumer and Producer surplus. Illustrate your answer with the demand and supply
    diagram.

    2. Resources are allocated efficiently, and the sum of consumer surplus and producer surplus is
    maximised when
    a) marginal benefit exceeds marginal cost.
    b) total revenue is equal to total cost.
    c) marginal benefit is equal to total cost.
    d) marginal benefit is equal to marginal cost.

    3. Which of the following statements is incorrect?


    a) Consumer surplus is the difference between the maximum price consumers are willing to pay
    and the minimum price producers are willing to accept.
    b) Consumer surplus is the difference between consumers' willingness to pay and the actual
    market price paid.
    c) Producer surplus is the price received for a good minus its MC, summed over the quantity sold.
    d) Producer surplus is the area between the supply curve and the market price received.

    4. Which of the following statements is correct? Deadweight loss is:


    a) Borne entirely by consumers.
    b) Borne entirely by producers.
    c) The society’s loss in total surplus resulting from inefficient level of production.
    d) The loss in producer surplus resulting from inefficient level of consumption.

    5. Which of the following statements is incorrect?


    a) A rent ceiling set above the equilibrium price has no effect on the quantity of housing
    demanded.
    b) A rent ceiling set below the equilibrium level creates a housing shortage.
    c) A rent ceiling set below the equilibrium level decreases housing search activity.
    d) A rent ceiling set below the equilibrium level decreases producer surplus and decreases
    consumer surplus.

    6. Which of the following statements is correct?


    a) A minimum wage set below the equilibrium wage rate increases unemployment.
    b) A minimum wage set below the equilibrium wage rate has no effect.
    c) A minimum wage set above the equilibrium wage rate increases unemployment.
    d) Both (b) and (c).

    ECO100 INTRODUCTION TO ECONOMICS Page 1


    ECO100 INTRODUCTION TO ECONOMICS

    7. Tobacco producers are more likely to bear the burden of a tax imposed on ____ because ____.
    A. Consumers of tobacco products; because demand is highly inelastic.
    B. Consumers of products; because tobacco farmers can easily switch to other crops.
    C. Consumers of tobacco products; because supply of tobacco is perfectly inelastic.
    D. Consumers of tobacco products; because supply of tobacco is perfectly elastic.

    8. Consider award or minimum wage in the labour market. Suppose the award (minimum) wage is
    above the equilibrium wage in the market for unskilled labour.

    a. Using a supply and demand diagram of the market, show the market wage, the number of
    workers who are employed and the number of workers who are unemployed.

    b. Is the government wage policy efficient? Illustrate your answer with diagram in part (a).

    9. The market for cigarette is in equilibrium. Suppose the government imposes a tax T on each
    packet of cigarette sold.

    (a) With the aid of a demand and supply diagram of cigarettes, analyse the impact of the tax
    on the equilibrium price and quantity of cigarette. Correctly label the diagram.

    (b) What is tax incidence and what does tax incidence depend upon? Identify the tax
    incidence on the diagram in part (a).

    (c) Is the tax policy efficient? Explain, referring to the diagram in part (a). [3 marks]

    ECO100 INTRODUCTION TO ECONOMICS Page 2

    You might also like