Exam 9: Applying the Competitive Model

-The above figure shows the market for rice in Japan where price is expressed in dollars. S represents the domestic supply curve, and the horizontal line at P = $1 represents the world supply curve. Currently Q₁ units are imported. The Consumption distortion loss is equal to

The United States and many other countries often impose trade sanctions on other countries. These sanctions

Long-run economic profit does not exist for fixed factors like land because

The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, then social welfare will most likely

Suppose anyone with a driver's license is capable of supplying one trip from the airport to the downtown business center on any given day. The long-run supply curve of such trips is horizontal at p = $50, which is the average cost of such trips. Suppose daily demand is Q = 1000 - 10p. Calculate the change in consumer surplus, producer surplus and social welfare if the city government requires those people supplying such trips to possess a special license, and the government will issue only 300 licenses.

-The domestic demand curve, domestic supply curve, and world supply curves for a good are given in the above figure. All the curves are linear. Initially, the country allows imports. Then imports are banned. Calculate how consumer and producer surplus change because of the ban. Is the country better off with the ban on imports? Why?

Deadweight loss occurs when

The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, which of the following is most likely to occur?

Which of the following expressions can be used to calculate the producer surplus (PS)?

-The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the loss in social welfare will equal

-The domestic demand curve, domestic supply curve, and world supply curves for a good are given in the above figure. All the curves are linear. Initially, the country allows imports. Then it imposes a $25 specific tariff. Calculate the deadweight loss generated by this tariff.

What is one reason firms might lobby to prevent entry into their market?

Firms are ________ with an economic profit of zero, they will ________ in the industry since they ________ be better off in another industry.

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

In a competitive market, the demand and supply curves are Q = 12 - P and Q = 5P, respectively. If output is fixed at Q = 5, what is the amount of the resulting deadweight loss?

The tax revenue that is generated by a government tax is counted towards total welfare.

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). If the price were zero, consumer surplus equals

A per unit subsidy increases both consumer and producer surplus, but results in a deadweight loss.

Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk. The group argues that such a policy would save the "family farm." Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting price, output and social welfare from such a policy. Compare this result to the competitive equilibrium.

Suppose a consumer advocacy group has convinced legislators that vitamin pills should be free to consumers. Such a policy would enhance the health of the citizenry, they argue. Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting output and social welfare from such a policy. Compare this result to the competitive equilibrium.