ADVANCED ANALYSIS Assume the following values for Figures 4.4a and 4.4b: Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags. The market eq
uilibrium price is $45 per bag. The price at a is $85 per bag. The price at c is $5 per bag. The price at f is $59 per bag. The price at g is $31 per bag. Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions. LO4.2 What is the dollar value of the total surplus (producer surplus plus consumer surplus) when the allocatively efficient output level is being produced? How large is the dollar value of the consumer surplus at that output level? What is the dollar value of the deadweight loss when output level Q2 is being produced? What is the total surplus when output level Q2 is being produced? What is the dollar value of the deadweight loss when output level Q3 is produced? What is the dollar value of the total surplus when output level Q3 is produced?
a. Total surplus is the area bounded by points a, b, and c. To calculate total surplus, we use the following formula for the area of a triangle: Area = ½ × Base × Height. The area between the demand curve and the supply curve for the quantity ranging from 0 to 20 is the total economic surplus. This is a triangle with a base (best read off the price axis) of $80, which is the price difference at Q = 0, or between points a and c, and a height of 20 (the number of units purchased in equilibrium). Using these values, we have a total surplus of (1/2) × $80 × 20 = $800.
The consumer surplus is the area between the demand curve and the equilibrium price line. Here we have a base of $40 (the price difference between the demand schedule price at Q = 0, which is $85, and the equilibrium price of $45). The height of the triangle is once again 20 (the number of units purchased in equilibrium). Using these values, we have a consumer surplus of (1/2) × 40 × 20 = $400.
b. Deadweight loss is the difference in total surplus between an efficient level of output Q1 and a reduced level of output at Q2. We can calculate this as the area of a triangle bounded by points bde. The base of this triangle is the difference in prices at points d and e, or $55 – $35 = $20. The height of this triangle is given by the difference in the restricted level of output of Q2 = 15 and the efficient level of output Q1 = 20, or 5 units. Thus, the area of this triangle (the deadweight loss) is equal to (1/2) × $20 × 5 = $50. The remaining total surplus can be found by subtracting the deadweight loss from the original (efficient) total surplus. This is $800 (maximum total surplus) – $50 (deadweight loss) = $750.
c. The deadweight loss from overproduction is the difference in total surplus between an efficient level of output Q1 and an additional level of output at Q3. We can calculate this as the area of a triangle bounded by points bfg. The base of this triangle is the difference in prices at points f and g, or $59 – $31 = $28. The height of this triangle is given by the difference in the additional level of output Q3 = 27 and the efficient level of output Q1 = 20, or 7 units. Thus, the area of this triangle (the deadweight loss) is equal to (1/2) × $28 × 7 = $98. The remaining total surplus can be found by subtracting the deadweight loss from the original total surplus. This is $800 (maximum total surplus) – $98 (deadweight loss) = $702. Note here that we maximize total (producer + consumer) surplus by producing the equilibrium quantity, but we lose surplus from overproduction (inefficient use of resources).
We know a used car is $ 5,000. You can drive 10, 000 miles per year in that car for 4 years. The care insurance per year would be $ 1,200. You know that you will spend $ 400 on maintenance. The gas will cost $ 4 per gallon and the car gets 25 miles per gallon.
Total Cost = Cost Car + 4 × Car Insurance + 4 × Maintenance + 4 × Miles/Year ×<span> (cost/gallon) / (miles/gallon) </span> We multiply by 4 since he figured out the car will last 4 years.
Answer: When an organization uses an employment practice that results in unfavorable outcomes to a protected class it is known as the adverse impact principle.
This act takes place when a organization, wittingly or not, takes an action that will result in a individual's employment opportunity due to some elements beyond the individual's control.
Economic incentives is what encourages you to act in some way, while expectations are your needs your interests and your preferences. Economic incentives offer you the drive to follow your interests. These can be grouped further as extrinsic and intrinsic incentives.
Extrinsic incentives arise from the outside of the human being. These are the usual economic incentives you're likely to think of all along. Extrinsic rewards include cash, bonuses, sales, and earnings. Intrinsic incentives are inherent inducements, and are inner to the individual. It is an intrinsic motivation to get satisfaction from jobs.
