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 34, Problem 4DQ
To determine
The long-term and short-term effects of removing quota.
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Which of the following would benefit producers, harm consumers and reduce total surplus?
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Decrease of a subsidy.
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Consider a large country with the following inverse demand and supply functions of
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Chapter 34 Solutions
Economics: Principles & Policy
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- Suppose that the world price of oil is roughly $100.00 per barrel and that the world demand and total world supply of oil equal 34 billion barrels per year (bb/yr), with a competitive supply of 20 bb/yr and 14 bb/yr from OPEC. Statistical studies have shown that the short−run price elasticity of demand for oil is −0.05, and the short−run competitive price elasticity of supply is 0.10. Using this information, derive linear demand and competitive supply curves for oil. Let the demand curve be of the general form Q=a−bP and the competitive supply curve be of the general form Q=c+dP, where a, b, c, and d are constants. The equation for the short−run demand curve is? The equation for the short−run competitive supply curve isarrow_forwardThe domestic supply and demand curves for hula beans are as follows: P = 50 + Q (supply) and P = 200 – Q (demand) where P is the price in cents per pound and Q is the quantity in millions of pounds. Ireland is a small producer in this market where the current price is 60 cents per pound. The Irish Government is considering a tariff of 40 cents per pound. The quantity of hula beans imported into Ireland after the tariff is A. 100B. 50C. 130D. 90arrow_forwardSuppose that the world price of oil is roughly $50.00 per barrel and that the world demand and total world supply of oil equal 34 billion barrels per year (bb/yr), with a competitive supply of 20 bb/yr and 14 bb/yr from OPEC. Statistical studies have shown that the long-run price elasticity f demand for oil is -0.40, and the long-run competitive price elasticity of supply is 0.40. Using this information, derive linear demand and competitive supply curves for oil. Let the demand curve be of the general form Q = a - bP and the competitive supply curve be of the general form Q = c+dP, where a, b, c, and d are constants. The equation for the long-run demand curve is O A. Q=47.50 -0.27P. O B. Q=13.50 -0.27P. OC. Q=47.50-P O D. Q=47.50+ 0.27P. O E. Q=13.50-47.50P. The equation for the long-run competitive supply curve is O A. Q=12.00 + 47.50P. OB. Q=12.00 -0.16P. OC. Q 8.00+ 0.16P. O D. Q=8.00+ 0.27P. O E. Q=12.00 +0.16P.arrow_forward
- Using demand and supply, illustrate the effects of a quota imposed by the Canadian government on US wheat . Show the US wheat market and the Canadian wheat market.arrow_forwardThe domestic supply and demand curves for hula beans are as follows: P = 20 + Q (supply) and P = 250 – Q (demand) where P is the price in cents per pound and Q is the quantity in millions of pounds. Ireland is a small producer in this market where the current price is 50 cents per pound. The Irish Government is considering a tariff of 50 cents per pound. The increase in producer surplus after the tariff has been imposed is equal to A. 2750 B. 4000 C. 2500 D. 1500arrow_forwardIndicate which of these are a reason that market inefficiencies persist? Check all that apply. Inefficiencies are undiscovered Inefficiencies are undiscovered New technology New technology Lowering of transaction costs Lowering of transaction costs Inefficiencies seem rational Inefficiencies seem rational Influx of foreign investors Influx of foreign investors Demographic factors Demographic factors Inefficiencies seem irrationalarrow_forward
- Cocoa (Cacao) beans and imported from South America. The government has decided to increase the tax on imported goods such as cocoa. What effect would this have on the market for hot cocoa?arrow_forwardU.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing re-importation of drugs to the United States.arrow_forwarda) Draw a graph with supply and demand curves that intersect and establish a market equilibrium price of $10 per unit and equilibrium market quantity of 100 units. Be sure to label your graph completely.arrow_forward
- The domestic supply and demand curves for hula beans are as follows: P = 20 + Q (supply) and P = 250 - Q (demand) where P is the price in cents per pound and Q is the quantity in millions of pounds. Ireland is a small producer in this market where the current price is 50 cents per pound. The Irish Government is considering a tariff of 50 cents per pound. The reduction in consumer surplus after the tariff has been imposed is equal to A. 7500 B. 10,000 C. 8,750 D. 1500arrow_forwardA federal regulation that required that all beef consumed in the US must be grown and processed in the US is likely to: Drive up the price of beef in the US Increase beef consumption in the US Decrease consumption of chicken in the US (assuming chicken is a substitute for beef in the US) Increase international trade in beef productsarrow_forwardAn increase in taste for the good with a simultaneous decrease in subsidies will cause the equilibrium price to fall and equilibrium quantity to increase. True or Falsearrow_forward
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