Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184890
Author: PINDYCK
Publisher: PEARSON
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Question
Chapter 9, Problem 11E
(a)
To determine
Identify the domestic
(b)
To determine
Identify the consumers gain and domestic producers’ loss.
(c)
To determine
Identify the effects of changes in import quota on dead weight loss and foreign producers.
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Students have asked these similar questions
Suppose the market for steel is expressed as follows:
Domestic demand: p = 40 - 0.2q, or q = 200 - 5p
Domestic supply: p = 0.2q, or q = 5p
Domestic supply (foreign): p = 0.1q, or q = 10p
a) What is the equilibrium price and quantity if there is free trade, with no restriction on imports?
b) What is the equilibrium price and quantity if the government imposes a binding import quota of 20 units? Depict parts a and b on a single graph.
c) How are US steel firms affected by the quota? US automakers? Explain briefly.
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.
3. What will be the cost of inefficient production, loss in consumer surplus, and deadweight loss? Use a diagram to help answer the question.
(22) How would the creation of an import quota affect the market for a good?
Imported supply increases
Domestic supply decreases
Market price increases
Consumer surplus increases
Producer surplus decreases
Chapter 9 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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