Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 15, Problem 2TY
To determine
The effect of a new disease that attacks coffee plants and the efficient allocation of resources.
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Students have asked these similar questions
With the recent war between Russia and Ukraine, the production and thus exports of wheat have declined (which increased the price of such exports), because Ukraine is the major producer and exporter of the same. As a result, what can we expect in the market for rice, used by many as a staple instead of wheat?
a) The equilibrium price will increase, the equilibrium quantity will decrease
b) The equilibrium price will increase, the equilibrium quantity will increase
c) The equilibrium price will decrease, the equilibrium quantity will increase
d) The equilibrium price will decrease, the equilibrium quantity will decrease
Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply
equals demand in each case). Assume further that a good harvest impacts the world's sugar cane
crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and
whiskey are substitutes in consumption.
Discuss the impact of the good harvest on each of the three markets.
Use an appropriate economic model (graph) to show the effect of an increase in the worldwide production of wheat on the international market for wheat, and explain the impact this will have on Australian farmers. Also explain the effects of this on markets that are related to the wheat market.
Chapter 15 Solutions
Economics: Principles & Policy
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- which statement is true and why are the others false.justify Moving production from a high-cost producer to a low-cost producer will decrease total surplus;TRUE Suppose the United States changed its laws to allow for the legal sale of a kidney and the government allowed a free market in organs for transplant then there would be a decrease in the price of a kidney and an increase in the shortage of kidneys for transplant;TRUE If a good is not being produced by sellers with the lowest cost, then the market reflects inefficiency in the allocation of resources:FALSE Assume there are only three sellers in a particular market. The cost of production for Annie is $50, for Beth it is $40 and for Cathy it is $35. If the price in the market is $45 then Annie will sell the product but Beth and Cathy will not sell. :FALSE Suppose favorable weather provides increases apple production. As a result, consumer surplus in the market for orange juice decreases because the supply curve of apple juice…arrow_forwardAssume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption. Discuss the impact of the good harvest on each of the three markets. Discuss the effect on the markets for each of the three products if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers and whiskey producers?arrow_forwardAssume that we are looking at the market for California wine. Assume that the initial equilibrium price is $20 and quantities are 1,000. What would be the impact on this market of a severe drought that destroys 50% of the grapes that are used to make this wine? Supply would shift to the left, a shortage would develope, prices would decrease resulting in higher prices and lower quantity of wine. Supply would shift to the left, a surplus would develope, prices would increase resulting in higher prices and lower quantity of wine. Supply would shift to the left, a shortage would develope, prices would increase resulting in higher prices and higher quantity of wine. Supply would shift to the left, a shortage would develope, prices would increase resulting in higher prices and lower quantity of wine.arrow_forward
- Explain why price moves towards equilibrium in a free market and why the equilibrium price may change over time.arrow_forwardThe table shows the hypothetical demand and supply for coffee beans in two countries: Mexico and Armenia. Price ($) per pound of coffee beans Price ($/lb) Mexico quantity demanded (lb) Mexico quantity supplied (lb) Armenia quantity demanded (lb) Armenia quantity supplied (lb) 8 180 500 155 210 7 200 460 180 180 6 250 410 200 160 5 280 360 220 140 4 320 320 240 125 3 350 280 260 115 In autarky, what would the equilibrium price and quantity be in Mexico and Armenia? equilibrium price in Mexico: $ equilibrium quantity in Mexico: lb equilibrium price in Armenia: $ equilibrium quantity in Armenia: lbarrow_forwardThis is a picture of a farmer's market. A farmer's market is a place where farmers bring their fresh produce to sell to consumers at low prices. Based on the information provided to you, name at least two scarce resources that were probably used to produce the fruits and vegetables shown in the picture. What would happen if one of those resources were no longer available? Choose which resource you want to pretend is no longer available, then provide an example as to how the business would be affected.arrow_forward
- (a) Assume that the markets for sugar cane, rum, and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes for consumption. (i) Discuss the impact of the good harvest on each of the three markets. (ii) Discuss the effect on the markets for each of the three products if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers, and whiskey producers? (b) Identify a newspaper article that illustrates a market failure in your assigned Caribbean country. Ensure that you provide a screenshot of the article in your submission. NOTE: Only the following market failures should be examined: public good, asymmetric information, positive or negative…arrow_forwardConsider the market for gasoline that is initially in equilibrium. Suppose that the Middle East, a major supplier of petroleum used to produce gasoline, erupts into war. At the same time suppose that the price of electric vehicles falls. Given these changes and holding everything else constant, what happens to the equilibrium price and quantity in the market for gasoline relative to the initial equilibrium price and quantity in the market a. The equilibrium price may increase, decrease or remain the same while the equilibrium quantity will decrease b. The equilibrium price may increase, decrease or remain the same while the equilibrium quantity willincrease c. The equilibrium price will increase while the equilibrium quantity may increase, decrease or remain the same d. The equilibrium price will decrease while the equilibrium quantity may increase, decrease or remain the samarrow_forwardSuppose that, as part of an international trade agreement, the U.S. government reduces the tariff on imported coffee. Will this affect the supply or the demand for coffee? Why? Which determinant of demand or supply is being affected? Show graphically with before- and after-curves on the same axes. How will this change the equilibrium price and quantity of coffee? Explain your reasoning.arrow_forward
- Scenario 1: Because of a recent international trade agreement, the Indian government reduces the tariff on imported coffee. Do you think a reduction of tariff by the government affect the supply or the demand for coffee? If yes, why do you think so? Which determinant of demand or supply is being affected? How will this change the equilibrium price and quantity of coffee? Explain your reasoning and show the changes graphically. Scenario 2: Suppose the National Institutes of Health (NIH) publishes a study finding that coffee drinking reduces the probability of getting colon cancer. Do you think this will affect the market for coffee? If yes, why do you think so? Which determinant of demand or supply is being affected? How will this change the equilibrium price and quantity of coffee? Explain your reasoning and show the changes graphically. Scenario 3: Now, combine both the scenarios. In case if the Indian government reduces the tariff on imported coffee, and the recent study published by…arrow_forwardThe weekly demand and supply schedules for T-shirts (in millions) in a free market are as follows: Price Quantity demanded Quantity supplied 8 6 18 7 8 16 6 10 14 5 12 12 4 14 10 3 16 8 2 18 6 1 20 4 4.Assume that changes in fashion cause the demand for T-shirts to rise by 4 million at each price. What will be the new equilibrium price and quantity? Has equilibrium quantity risen as much as the rise in demand? Explain why or why not. 5.Now plot the data in the table and mark the equilibrium. Also plot the new data corresponding to (b).arrow_forwardPrice (dollars per pound) 5.00 4.50- 4.00- 3.50- 3.00- 2.50- 2.00- 1.50 1.00- 0.50- 0.00+ 0 The Market for Copper S D 1 2 3 4 5 6 7 8 Quantity (million metric tons/year) 9 10arrow_forward
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