Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 5, Problem 4RQ
To determine
Relevance of sugar tax.
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Before Cyprus joined the EU there was an import tariff on imported fresh meat from the EU of €1.00 per Kg at a selling price of €6.00 per kg. The total annual Demand was 20m kgs (20,000tons) per year while when the tariff was lifted (after the accession to the EU) the annual demand increased to 260m kgs (260,000tons). At the €6.00 per kg price, domestic supply has been half of the total annual supply while when the tariff was lifted this was reduced by 20%.
Calculate:
The total increase in consumer surplus due to the abolition of the tariff.
The total amount of the tariff revenue that had been lost.
The change in the domestic and foreign producer surplus.
Suppose 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.
Country C imports 80,000 metric tons of steel from Country U and produces domestically 80,000 metric tons per year. The world price of steel is $500 per metric ton. Assuming linear schedules, research analysts estimated the price elasticity of domestic supply to be 0.50 and theprice elasticity of domestic demand to be -0.25 in the current market equilibrium. Country C imposes an import duty of $150 per metric ton that caused the world price to fall by 10%.
Summarise and analyse the quantity of steel produced, consumed and imported in Country C. Analyse and discuss the welfare gain from trade in Country C. Show your answers of the steel market with a proper diagram.
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