Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Chapter 4, Problem 4E
To determine
The effect of import quota on sugar on
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Suppose the world price of oil is $15 per barrel. At that price, the United States imports 400 million barrels daily and consumes 600 million barrels daily. The government then imposes a $5 per barrel tax on oil imports. For every dollar increase in oil prices, domestic consumption decreases by 20 million barrels per day, while domestic production increases by 40 million barrels per day.
1. What will be the new oil price (assuming world supply is perfectly elastic at $15)?
Graphically explain the effect of the following on the equilibrium:(1) Offer of subsidies(2) Increase in price of factors of production(3) Increase of young population in a destination commonly known for consumption of elderly products(4) Improvement of technology(5) Increase in price of one of a complementary good
Discuss the price elasticity of demand and the price elasticity of supply of goods that have low value but are limited in supply. Discuss why the reduction in world price of such commodities can be considered harmful to an economy that exports such commodities.
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Microeconomics (MindTap Course List)
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