Exam 9: Applications of the Competitive Model

In order to fund health care, the government passes a bill that proposes to establish a per pack tax of $5 on cigarettes levied on sellers. Suppose the supply of cigarettes is given by P = Q/4 and demand for cigarettes is given by P = 200 - Q. i)What will be the impact of this bill? Specifically, how many fewer packs will be smoked? ii)What will be the consumer surplus, producer surplus, and dead weight loss with the tax? iii)How much revenue will the government collect?

Although a price ceiling sets a maximum price that sellers can charge for a good, such a policy could harm consumers.

A price ceiling is a policy that:

Quotas in agriculture exist to:

Suppose the market demand for cigarettes is: D=10- P, and the supply of cigarettes is: S=- 2+P, where P is the price per pack of cigarettes. If the government imposes a cigarette tax of $1 per pack, the price paid by consumers is:

The surprising observation that houses in cold climates have higher inside temperatures is consistent with the competitive model because:

The current domestic demand for steel is P = 150 - 2Q and the current supply is given by P = 30 + Q. The world steel price is $40. The government decides to repeal the $10 tariff on steel. i)What is the impact of this bill? Specifically, what will be the change in domestic consumer surplus and producer surplus? ii)What will be the loss in government revenue from not collecting the tariff and how many more units will be imported?

The market demand curve shifts when:

An ineffective quota:

An import tariff:

If the demand curve shifts down and to the left in an increasing cost market, then:

Which of the following would not cause a shift in the firm's cost curves?

A per unit tax will:

If the demand curve in a constant cost market shifts up and to the right, then:

A per unit tax in a competitive market with demand elasticity less than zero:

What is the fundamental error in the suggestion that prices be based on costs rather than on supply and demand?

Allowing people to carry concealed weapons:

An import tariff:

Queues of customers:

In the market for crime, the imposition of penalties: