Based on your answer to the Senate Foreign Relations Committee one of the senators raises a concern that the free market price might be too high for the typical Chinese citizen to pay. Accordingly, she asks you to explain what would happen if the Chinese government privatized the market but then set a price ceiling at the Chinese equivalent of $1.50. How do you answer? Assume that the market demand and supply curves (in U.S. dollar equivalent prices) are still given by Qd = 10 − 2P and Qs = 2 + 2P

Based on your answer to the Senate Foreign Relations Committee one of the senators raises a concern that the free market price might be too high for the typical Chinese citizen to pay. Accordingly, she asks you to explain what would happen if the Chinese government privatized the market but then set a price ceiling at the Chinese equivalent of $1.50. How do you answer? Assume that the market demand and supply curves (in U.S. dollar equivalent prices) are still given by Qd = 10 − 2P and Qs = 2 + 2P

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter4: Prices: Free, Controlled, And Relative

Section: Chapter Questions

Problem 7QP

See similar textbooks

Similar questions

According to an article in China Daily, China recently accelerated its plan to privatize tens of thousands of state-owned firms. Imagine that you are an aide to a senator on the Foreign Relations Committee of the U.S. Senate, and you have been asked to help the committee determine the price and quantity that will prevail when competitive forces are allowed to equilibrate the market. The best estimates of the market demand and supply for the good (in U.S. dollar equivalent prices) are given by: Qd=12 -2P and Qs=-4 + 2P, respectively. a. Determine the competitive equilibrium price and quantity b. Based on your answer to the Senate Foreign Relations Committee in question (2a), one of the senators raises a concern that the free market price might be too high for the typical Chinese citizen to pay. Accordingly, she asks you to explain what would happen if the Chinese government privatized the market, but then set a price at the Chinese equivalent of $3.00. How do you answer? What…
Identify the following statement's accuracy and briefly state why. government intervention is needed to assist the growth of the local economy. Import restriction is used to limit the supply of foreign products, thus artificially increasing the price of foreign products. Import restrictions such as import tax will increase the price of both foreign and local products. Market failure is the equal and efficient distribution of resources in a market. Market failure occurs due to the failure of price mechanism where the supply of a product does not equal the demand of a product, leading to an absence of an equilibrium point in the market.
Let us consider the case of Good X in Malaysia. The demand and supply functions for Good X in Malaysia are Demand function: QD=361−2P Supply function: QS=23+P Find out the number of imports at Pw=70 (Please give your answers in two decimal places. ) If the import quota was 80 units what will be the new price in the Malaysian market? (Please give your answers in two decimal places.) How many Good X will be produced domestically after the quota has been implemented? (Please give your answers in two decimal places.) How many Good X will be consumed by domestic consumers after the quota has been implemented? (Please give your answers in two decimal places.) What will be the import after implementing an import quota of 80 units (Please give your answers in two decimal places.) What is the percentage change in imports after the imposition of the import quota? (Please give your answers in two decimal places, Multiply by 100 to convert into a percentage (if you get 0.40 then submit 40 in the…
The policies of OPEC+ have nothing to do with the surge in crude prices, two sources in the group said on Monday, downplaying the likelihood of any boost to global supply from the alliance that includes Russia and Saudi Arabia. Oil spiked to its highest price since 2008 on Monday amid fears about supply shortages as the United States and European allies considered banning Russian oil, while the prospects of a swift return of Iranian crude to markets receded. At its last meeting on March 2, the Organization of the Petroleum Exporting Countries (OPEC), Russia and allied producers stuck to a plan for a modest output rise in April and ignored the Ukraine crisis in their talks. "The problem is the current market conditions have nothing to do with OPEC policy/policies. It has nothing to do with supply (production) shortfall," one of the sources said. "We all know the reasons for the current price. OPEC or OPEC+ has nothing to do with all the reasons that are driving prices to…
The market for rice in an East Asian country has demand and supply given by QD = 28 – 4P and QS = -12 + 6P, where quantities denote millions of bushels per day. a. If the domestic market is perfectly competitive, find the equilibrium price and quantity of rice. Compute the triangular areas of consumer surplus and producer surplus. b. Now suppose that there are no trade barriers and the world price of rice is $3. Confirm that the country will import rice. Find QD, QS, and the level of imports, QD – QS. Show that the country is better off than in part (a), by again computing consumer surplus and producer surplus. c. The government authority believes strongly in
Coffee is now the second most traded commodity in the world after crude oil. Not only has demand for various coffee products risen sharply in Western countries in recent years, increasingly there is also greater taste for coffee drinks in developing countries such as China and India. In addition, by-products of coffee beans have become popular such as coffee leaves which can be used to brew a tea with known health benefits. However, as a natural produce, coffee plants are subject to weather conditions. Recently major producers such as Brazil have been plagued by droughts. Using the demand-supply model, explain the likely effects of these phenomena in the coffee bean market. How can a market analyst use this information to her advantage?
An alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. When a unit of a good is sold, that means the value the seller places on the good is lower than the value the buyer places on the good. After the sale has taken place, the ownership of the good has been transferred from a person who has a low value to a person with a high value. This is called a reallocation from low to high valued use. Sometimes this reallocation involves a physical movement of the good rather than a transfer of legal ownership. The good is transported from an area where the price of the good is low to an area where the price of the good is higher. This is also called a reallocation from…
An alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. When a unit of a good is sold, that means the value the seller places on the good is lower than the value the buyer places on the good. After the sale has taken place, the ownership of the good has been transferred from a person who has a low value to a person with a high value. This is called a reallocation from low to high valued use. Sometimes this reallocation involves a physical movement of the good rather than a transfer of legal ownership. The good is transported from an area where the price of the good is low to an area where the price of the good is higher. This is also called a reallocation from…
Which of the following is not a reason why negative consequences can result from efforts to control prices? Market equilibrium indicates the optimal or efficient amount of goods, services, labor, or financial capital. Controlling prices interferes with the forces of supply and demand. Prices of goods, services, labor, and financial capital link different markets together. Controlling one market can affect the nature of other markets. Manipulating price does not change the fundamental characteristics of supply and demand. Prices reflect the amount of profit that producers want to gain for providing goods, services, labor, or financial capital to the market.
Suppose market demand and supply are given by Qd=100-2P and Qs=5+3P. If a price ceiling of $15 is imposed, what will be the resulting full economic price? Show your work.
In the graph above, if the maximum price is set at P1, what area(s) represent the deadweight loss as a result of this policy? Question 14 options: a) Areas A+C+G b) Area B c) Areas E+F d) Areas C+D e) Areas B+D
Export subsidies, such as for aircraft producers, can in theory increase domestic welfare when firms have pricing power or returns to scales are present. True False