EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Chapter 31, Problem 2P
To determine
(a)
Impact on market clearing price of pollution abatement equipment.
To determine
(b)
Payment made for pollution abatement equipment.
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=
150 - 10PD,
2-4 Suppose the annual demand for cotton is given by the demand curve QD
and the supply is Qs = 10Ps - 50. Now U.S. government decide to impose a subsidy
for farmers of $2 per pound. Please show all your calculation and draw graph clearly
with labeled areas.
a) Find the producer and consumer surplus if there is no subsidy.
b) Find what subsidy has changed the producer and consumer surplus, and is there any
government surplus and deadweight loss? Why?
c)
Would there be any difference if the government decide to give subsidy to buyers?
Explain with the graphs of comparing price, quantity, producer and consumer
surplus, government surplus and deadweight loss.
Only solve d and e
(d)Calculate the deadweight loss from this subsidy. (e) Will the government’s subsidy meet its objective?
18-19. In the competitive market for white sugar, consumer demand is given by P=100-0.050 and
suppliers' behaviour is represented by the supply curve of P=1+0.005Q, where P is measured in dollars
and Q is measured in kilos per month. Questions 17 through 19 refer to this market.
18. Imagine now that the government imposes a price ceiling of $5.00 per kilo on sugar, and that the
ceiling is obeyed by all market participants. In the resulting equilibrium the total number of kilos of sugar
exchanged in the market is equal to:
A) 2100
G) 800
B) 2000
H) 600
A) $5
G) $70
C) 1900
I) 400
B) $10
H) $80
19. Suppose suppliers obey the price ceiling but consumers sell sugar on a black market. What will the
black market price for sugar be?
D) 1400 E) 1200
J) None of the above
C) $10.50
I) $21
E) $50
F) 1000
D) $40
J) None of the above
F) $60
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- 1. The government wishes to encourage students to become more literate in economics and is therefore giving a S10 per unit subsidy to the purchasers of microeconomics textbooks. Given the following demand and supply, what are the economic effects of this subsidy? Illustrate with a diagram. Show work. P= 100 - Qa P= 20 + 3Q. (1) (2) Original Price Original Output New Price Consumer Pays New Output New Price Producer Receives Benefit to consumer Benefit to producer Cost to governmentarrow_forwardexample of subsidy in the philippinesarrow_forwardThe table below shows the demand and supply schedule for gasoline in a hypothetical country called Microland Price per litre ($) Quantity Demanded in 000 Quantity Supplied in 000 litres (per Month) litres (per month) 11 0 27 10 2 25 9 4 23 8 6 20 7 8 17 6 10 15 5 12 12 4 14 10 3 16 7 2 18 5 1 3 3 Explain the effect of the subsidy on the market forces and the equilibrium pointarrow_forward
- Use the graph below for the next few questions; it depicts the market for apples. There are two demand curves: 1) a no- subsidy demand curve (D) and 2) a subsidy demand curve (Ds). $ price 55 50 45 40 35 30 25 20 15 10 5 0 0 10 20 20 D D. S 30 40 50 60 70 80 90 100 110 How much is the dead weight loss from the subsidy? $50 $100 $150 ○ $0arrow_forwardExplain and evaluate: “Industry complains of the higher taxes it must pay to finance subsidies to agriculture. Yet the trend of agricultural prices has been downward while industrial prices have been moving upward, suggesting that on balance agriculture is actually subsidizing industry.”arrow_forwardPlease answer the following. A diagram and one paragraph should help to support your answer. Question: With consideration for elasticity (especially PED), what would be one industry in which the government instituting a subsidy would make sense and why?arrow_forward
- Read the following scenario. Corn is a very valuable product for which the U.S. government routinely offers subsidies. With no price support, the equilibrium price for corn is $300 per ton and the equilibrium quantity is 500 million tons per year. Suppose that the government agrees to pay farmers $350 for every ton of corn they produce and can't sell in the market. According to the farmer's market supply curve, 600 million tons per year is supplied at the price of $350 a ton, so production should increase to this amount. However, domestic users of corn cut back their purchases. Only 450 million tons a year is demanded at the price of $350 a ton, and purchases decrease to this amount. Farmers continue to produce 500 million tons of corn per year, so because they produce a greater quantity of corn than domestic buyers are willing to purchase, something must be done with the surplus. To make the price support work, the government decides to buy the surplus. Step 2 Use the scenario to…arrow_forwardSuppose Home is a small exporter of wheat. At the world price of 100 US dollars per tonne, Home growers export 20 tons of wheat. Now suppose the Home government decides to support its domestic producers with an specific export subsidy of 40 US dollars per tonne. Use Figure 1 to answer the following questions: Figure 1: Supply and Demand for Wheat at Home Home price 140 100 X 10 20 40 50 Supply Demand Quantity (a) Explain why consumer and producer surplus can be used to gauge the change in welfare caused by the export subsidy on individuals and firms.arrow_forwardAdd comments, discussion or calculations to your PART TWO document as directed. The market demand and supply curves for Quebec maple syrup are given by Qd = 2000 – 45P Q, = 35P+ 1000 where the quantities Q are in 1000s of gallons per year. The government of Quebec, seeking additional revenue sources, imposes a $2 per gallon tax on all maple syrup sold in the province. IN YOUR PART TWO DOCUMENT, your work in calculating the size of the deadweight loss of this tax on the market, and drawing relevant pictures. HERE answer the following question: How much deadweight loss will there be as a result of the tax?arrow_forward
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