1. Unit 2 Practice

2. Import Quotas S P Pe Pt Pw D Q Qe CS at market equilibrium?
PS at market equilibrium? S P A Pe B C E Pt F G H I J Pw K M N O R T L D 40 70
100
130
180 Q Qe

3. Import Quotas S P Pe Pt Pw D Q Qe CS at market equilibrium? A
PS at market equilibrium? BFK S P A Pe B C E Pt F G H I J Pw K M N O R T L D 40 70
100
130
180 Q Qe

4. Import Quotas S P Pe Pt Pw D Q Qe CS at market equilibrium? A
PS at market equilibrium? BC
CS at the world price?
PS at the world price? S P A Pe B C E Pt F G H I J Pw K M N O R T L D 40 70
100
130
180 Q Qe

5. Import Quotas S P Pe Pt Pw D Q Qe CS at market equilibrium? A
PS at market equilibrium? BC
CS at the world price? ABCEFGHIJ
PS at the world price? K
At the world price, how much is Qd?
At the world price, how much is Qs?
At the world price, how much is imported? S P A Pe B C E Pt F G H I J Pw K M N O R T L D 40 70
100
130
180 Q Qe

6. Import Quotas S P Pe Pt Pw D Q Qs Qe Qd CS at market equilibrium? A
PS at market equilibrium? BC
CS at the world price? ABCEFGHIJ
PS at the world price? K
At the world price, how much is Qd?
At the world price, how much is Qs?
At the world price, how much is imported? =140 S P A Pe B C E Pt F G H I J Pw K M N O R T L D 40 70
100
130
180 Q Qs Qe Qd

7. Import Quotas S P Pe Pt Pw D Q Qs Qe Qd
At the world price, how much is Qd?
At the world price, how much is Qs?
At the world price, how much is imported? =140
Import Quotas are used to limit the number of imports. This increases price and encourages more domestic production by profit seeking producers.
4. CS after import quota Pt
5. PS after import quota Pt S P A Pe B C E Pt F G H I J Pw K M N O R T L D 40 70
100
130
180 Q Qs Qe Qd

8. Import Quotas S P Pe Pt Pw D Q Qs Qe Qd
At the world price, how much is Qd?
At the world price, how much is Qs?
At the world price, how much is imported? =140
Import Quotas are used to limit the number of imports. This increases price and encourages more domestic production by profit seeking producers.
4. CS after import quota Pt
5. PS after import quota Pt
6. How much does the quota allow for this economy to import? S P A Pe B C E Pt F G H I J
ABCE Pw KF K M N O R T L D 40 70
100
130
180 Q Qs Qe Qd

9. Import Quotas S P Pe Pt Pw D Q Qs Qe Qd
At the world price, how much is Qd?
At the world price, how much is Qs?
At the world price, how much is imported? =140
Import Quotas are used to limit the number of imports. This increases price and encourages more domestic production by profit seeking producers.
4. CS after import quota Pt
5. PS after import quota Pt
6. How much does the quota allow for this economy to import?130-70=60 S P A Pe B C E Pt F G H I J
ABCE Pw KF K M N O R T L D 40 70
100
130
180 Q Qs Qe Qd

10. Excise Tax P
$14 12 11 8 S D 10 12 Q

11. Excise Tax P
Stax
$14 12 11 8 S D 10 10 12 Q

12. Excise Tax
Calculate
Tax Per Unit? P
Stax
$14 12 11 8 S D 10 10 12 Q

13. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3 P
Stax
$14 12 11 8 S D 10 10 12 Q

14. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? P
Stax
$14 12 11 8 S D 10 10 12 Q

15. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30 P
Stax
$14 12 11 8 S D 10 10 12 Q

16. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? P
Stax
$14 12 11 8 S D 10 10 12 Q

17. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20 P
Stax
$14 12 11 8 S D 10 10 12 Q

18. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? P
Stax
$14 12 11 8 S D 10 10 12 Q

19. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10 P
Stax
$14 12 11 8 S D 10 10 12 Q

20. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10
Total after tax Expenditures? P
Stax
$14 12 11 8 S D 10 10 12 Q

21. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10
Total after tax Expenditures? $140 P
Stax
$14 12 11 8 S D 10 10 12 Q

22. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10
Total after tax Expenditures? $140
Total Profit for firms? P
Stax
$14 12 11 8 S D 10 10 12 Q

23. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10
Total after tax Expenditures? $140
Total Profit for firms? $110 P
Stax
$14 12 11 8 S D 10 10 12 Q

24. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10
Total after tax Expenditures? $140
Total Profit for firms? $110
Deadweight Loss? P
Stax
$14 12 11 8 S D 10 10 12 Q

25. Excise Tax 12 P Stax $14 11 8 S D 10 10 12 Q Calculate
Tax Per Unit? $3
Total Tax Revenue? $30
Amount of Tax paid by consumers? $20
Amount of Tax paid by producers? $10
Total after tax Expenditures? $140
Total Profit for firms? $110
Deadweight Loss? $3 P
Stax
$14 12 11 8 S D 10 10 12 Q

26. One more Excise Tax Practice

27. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate CS Before Tax?
PS Before Tax? P
Stax $8 $6 $5 $4 $2 S D 6 9 Q

28. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate
CS Before Tax?$13.50
PS Before Tax?$13.50 P
Stax $8 $6 $5 $4 $2 S CS PS D 6 9 Q

29. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate
CS Before Tax?$13.50
PS Before Tax?$13.50
CS After Tax?
PS After Tax? P
Stax $8 $6 $5 $4 $2 S D 6 9 Q

30. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate
CS Before Tax?$13.50
PS Before Tax? $13.50
CS After Tax? $6
PS After Tax? $6 P
Stax $8 $6 $5 $4 $2 S CS PS D 6 9 Q

31. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate
CS Before Tax?$13.50
PS Before Tax? $13.50
CS After Tax? $6
PS After Tax? $6
Tax Revenue to the Government?
Dead Weight Loss After Tax? P
Stax $8 $6 $5 $4 $2 S CS PS D 6 9 Q

32. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate
CS Before Tax?$13.50
PS Before Tax? $13.50
CS After Tax? $6
PS After Tax? $6
Tax Revenue to the Government? $12
Dead Weight Loss After Tax? $3 P
Stax $8 $6 $5 $4 $2 S CS TR
DWL PS D 6 9 Q

33. Excise Tax P Stax $8 S $6 $5 $4 $2 D 6 Q 9 Calculate
CS Before Tax?$13.50
PS Before Tax? $13.50
CS After Tax? $6
PS After Tax? $6
Tax Revenue to the Government? $12
Dead Weight Loss After Tax? $3
B/W the two points is demand inelastic, elastic, or unit elastic? P
Stax $8 $6 $5 $4 $2 S D 6 9 Q

34. Price went up and TR went down OR
Excise Tax
Calculate
CS Before Tax?$13.50
PS Before Tax? $13.50
CS After Tax? $6
PS After Tax? $6
Tax Revenue to the Government? $12
Dead Weight Loss After Tax? $3
B/W the two points is demand inelastic, elastic, or unit elastic?
Elastic
Total Revenue Test
$5x9=$45
$6X6=$36
Price went up and TR went down OR P
Stax $8 $6 $5 $4 $2 S D 6 9 Q

35. Elasticity Coefficient
Excise Tax
Calculate
CS Before Tax?$13.50
PS Before Tax? $13.50
CS After Tax? $6
PS After Tax? $6
Tax Revenue to the Government? $12
Dead Weight Loss After Tax? $3
B/W the two points is demand inelastic, elastic, or unit elastic?
Elastic
Elasticity Coefficient
Quantity %
Price %
Elasticity Coefficient is >1 P
Stax $8 $6 $5 $4 $2 S D 6 9 Q

36. Elasticity Practice

37. Is the demand for each product elastic or inelastic?10 10 4 5 5 D 2 D D 10 25 Q 15 20 Q 10 30 Q

38. Is the demand for each product elastic or inelastic?10 10 4 5 5 D 2 D D 10 25 Q 15 20 Q 10 30 Q
TRT: 2 X 25 = 50
4 X 10 = 40
P increased
TR decreased
ELASTIC OR
TRT: 10 X 15 = 150
5 X 20 = 100
P decreased
TR decreased
INELASTIC OR
TRT: 10 X 10 = 100
5 X 30 = 150
P decreased
TR increased
ELASTIC OR

39. Is the demand for each product elastic or inelastic?10 10 4 5 5 D 2 D D 10 25 Q 15 20 Q 10 30 Q
Coefficient:
150%
100%
ELASTIC
Coefficient:
33%
50%
INELASTIC
Coefficient:
200%
50%
ELASTIC
>1
< 1
>1

40. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
Total Utility 1 20 30 2 35 50 3 45 65 4 75 5 52 80
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

41. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
Total Utility - 1 20 30 2 35 15 50 3 45 10 65 4 5 75 52 80
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

42. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
MU/$1
Total Utility
MU/$2 - 1 20 30 15 2 35 50 10 3 45 65
7.5 4 5 75 52 80
2.5
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

43. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
MU/$1
Total Utility
MU/$2 - 1 20 30 15 2 35 50 10 3 45 65
7.5 4 5 75 52 80
2.5
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

44. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
MU/$1
Total Utility
MU/$2 - 1 20 30 15 2 35 50 10 3 45 65
7.5 4 5 75 52 80
2.5
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

45. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
MU/$1
Total Utility
MU/$2 - 1 20 30 15 2 35 50 10 3 45 65
7.5 4 5 75 52 80
2.5
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

46. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
MU/$1
Total Utility
MU/$2 - 1 20 30 15 2 35 50 10 3 45 65
7.5 4 5 75 52 80
2.5
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

47. Utility Maximizing Rule
The consumer’s money should be spent so that the marginal utility per dollar of each goods equal each other.
MUx = MUy
Px Py
3 Apples and 2 Oranges
APPLES
ORANGES
Quantity
Total utility
Marginal Utility
MU/$
MU/$1
Total Utility
MU/$2 - 1 20 30 15 2 35 50 10 3 45 65
7.5 4 5 75 52 80
2.5
3 apples and 2 oranges
Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.