A. Quotas also have a redistributive effect if the fall in supply due to important restrictions enables the domestic producers to raise prices. B. The rise in prices will result in the redistribution of income between the producers and consumers in favor of the producers. A is True, B is Fals Both A & B is False A is False, B is True Both A & B is True

A. Quotas also have a redistributive effect if the fall in supply due to important restrictions enables the domestic producers to raise prices. B. The rise in prices will result in the redistribution of income between the producers and consumers in favor of the producers. A is True, B is Fals Both A & B is False A is False, B is True Both A & B is True

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter16: Externalities, The Environment, And Natural Resources

Section: Chapter Questions

Problem 2TY

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Suppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline. Will the tax discourage driving? a. Not at all as the tax burden will be entirely on firms as it is required by law to pay it. b. Driving may decline but possibly only slightly as demand is inelastic. c. Driving will decline considerably regardless of how demand is inelastic. d. Driving may decline by a significant amount particularly if demand is perfectly inelastic.
Assume the demand equation for a product is given by P=50-Q, while the supply curve is given by P=20+Q.a. Compute the consumers and producers surpluses at the laissez- faire market equilibrium price and quantity. b. Assume government sets a price ceiling of K30, what is the change in consumers and producers surpluses? c. What is the deadweight loss in welfare?
The government imposes a minimum wage $w on the price of labor, where the market demand and supply are Q = 300 – p and Q = p respectively. (a What level of minimum wage maximizes PS (the surplus to producers of labor, that is, the welfare of the employee pool)? Assume the best case scenario where the candidate workers whose willingness-to-accept- wages are lowest get the jobs in the rationing process b. For w = 250, calculate the PS for the worst case scenario, where the candidate workers whose willingness-to-accept wages are highest end up getting the jobs in the rationing process.
Suppose that the supply and demand corn corn are given by the inverse functions: P = 20 - 2Qd and P = 4 + 2Qs where P is the price for corn in USD/bu and Q is quantity of corn in billion bu. A price support is enacted equal to 14 USD/bu of corn. a. Conduct a complete welfare analysis of a price support, assuming that a surplus exists, but the government DOES buy the surplus. Use both numbers and graphs. b. Now suppose that the government wants to use a production quota to achieve the same objectives as the price support. Explain the likely outcome of the production quota, and its probability of success in meeting the objectives in today's global agricultural economy.
Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. d) Is there any inefficiency, and if so, can you define it and label it on the graph? e) If the producer has an inelastic supply curve, which market participant has the bigger tax burden? Explain.
Using demand and supply, illustrate the effects of a quota imposed by the Ghanaiangovernment on Cote d’Ivoire cocoa. Show the Cote d’Ivoire cocoamarket and the Ghanaiancocoamarket.
a- Start from the initial endowment point Ex A and Ey A for individual A(the commodities in the economy are x and y) and initial endowment point Ex B and Ey B for individual B. Write down the no excess demand condition for both individuals, and write down the collective no excess demand condition for the entire society, if the demands of individual A is XA and YA and the demands of individual B is XB and YB. b-If UA=XA 2/3×YA 1/3 and UB=min(2YB, XB) establish the main equation for the contract curve for the society. Assume that the starting endowment level is Ex A=2 Ex B=4 and Ey A=2 Ey B=1. c-In terms of the MRS`s for the two individuals why is it very hard to guarantee equalization? Graphically represent the situation. d- Compute the competitive equilibrium (prices and quantities) for the exchange economy? e- Does your results in d substantiate the first welfare theorem? Explain why or why not. f- Write down what the second fundamental theorem says about the trade-off between equity…
Indicate whether the statement is true or false, and justify your answer.Pigouvian taxes always improve social welfare.
Q4. Assume the market of non-medical masks can be described by the following equations: Demand: QD= 20 - P Supply: QS=2P-10 Where the quantity QP and QS are in millions, and price P is in dollars. Suppose all the masks are imported, and government decided to set a quota at 5 million units. a) Compute the pre-quota equilibrium price and quantity and illustrate your answers graphically. b) In your graph of a) Clearly show the con umer surplus (CS) and producer surplus (PS) before and after the quota. c) Show the dead weight loss (DWL) in the graph and calculate it.
where QD denotes the quantity demanded and p the price. The gold curve for apples is given by QO (p) = 3/2 p, where QO denotes the quantity o§ert. SC denotes the consumer surplus at market equilibrium in the absence of government intervention. Suppose the government imposes a ceiling price p = 30 on apples. We denote by SC the consumer surplus at market equilibrium with price ceiling. Calculate SC - SC *.
PDemand QDemand PSupply QSupply $10 0 $1 2 $9 3 $2 4 $8 6 $3 6 $7 9 $4 8 $6 12 $5 10 $5 15 $6 12 $4 18 $7 14 If the Government creates a quota of 6 units to reduce the consumption of the dangerous product, what will the price of the good be in the marketplace? How much deadweight loss is there? How much of the deadweight loss came from the consumers?
Please only answer Questions D, E and F: Suppose now that the government decides to increase the number of quotas available to 72 units, but it keeps the price support at the current level of $72. d) Calculate (1) the consumer surplus, (ii) the producer surplus, (iii) deadweight loss, (e) Which of the two options would the producers prefer? Option 1, Option 2, or None ? (f) Which of the two options would be preferred by society? Option 1, Option 2 or None?