1. What is the change in total welfare with the subsidy?
a) Gain of C and E, society is better off
b) Loss of C and E, society is worse off
c) Loss of K, society is worse off
d) Loss of M, society is worse off
2. What is the change in total welfare with the tax?
a) Gain of C and E, society is better off
b) Loss of C and E, society is worse off
c) Loss of K, society is worse off
d) Loss of M, society is worse off
For questions 3 through 5, use the same diagrams to consider the effects of the government setting a price floor at the same price that consumers would pay with a tax.
3. What is the consumer surplus before and after the price control?
a) A, B, and C before; A after
b) G, H, and I before; G after
c) G, H, J, and K before; G after
d) G and H before; G, H, J, and K after
4. What is producer surplus before and after the price control?
a) D, E, and F before; F after
b) D,E, and F before; B, D, and F after
c) J and L before; L after
d) JandLbefore;H,I,J,andLafter
5. What is the change in total welfare with the price control?
a) Gain of C and E, society is better off
b) Loss of C and E, society is worse off
c) Loss of K, society is worse off
d) Loss of M, society is worse off