Chapter 5

Use the information below to construct a stepgraph of the six sellers' willingness to sell. $$\begin{array}{cc}& \begin{array}{c}\text{ Willingness to }\\ \text{ sell one unit (\$) }\end{array}\\ \text{ Joseph }& 25\\ \text{ Juan }& 20\\ \text{ Kristin }& 60\\ \text{ Peter }& 10\\ \text{ Candice }& 25\\ \text{ Solomon }& 50\end{array}$$

Assume the market for wine is functioning at its equilibrium. For each of the following situations, say whether the new market outcome will be efficient or inefficient. [LO 5.5] a. A new report shows that wine is good for heart health. b. The government sets a minimum price for wine, which increases the current price. c. An unexpected late frost ruins large crops of grapes. d. Grape pickers demand higher wages, increasing the price of wine.

In which of the following situations can you say, without further information, that consumer surplus decreases relative to the market equilibrium level? [LO 5.6] a. Your state passes a law that pushes the interest rate (i.e., the price) for payday loans below the equilibrium rate. b. The federal government enforces a law that raises the price of dairy goods above the equilibrium. c. Your city passes a local property tax, under which buyers of new houses have to pay an additional 5 percent on top of the purchase price. d. The government lowers the effective price of food purchases through a food- stamp program.