Exam 9: Applying the Competitive Model

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).At the current price of $0.35 per minute,consumer surplus equals

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

Tariffs and quotas create a loss in social welfare because

When is the profit a firm earns equal to the producer surplus? Explain.

Advocates of steel tariffs to protect U.S.steel firms realize that when imposing such tariffs,the gains of firms are outweighed by the losses to consumers..This implies that

Explain why a government would impose an import tariff when domestic consumers suffer more than producers gain.

If a market produces a level of output that exceeds the competitive equilibrium output,then

The change in total welfare from a 10% increase in price will depend only on the elasticity of demand.

What is one reason activists might lobby the government to force firms to produce more output than they normally would in a perfectly competitive market?

Which of the following is a potential result of a price ceiling?

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.

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

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

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

While producing less than the competitive output decreases social welfare,the same cannot be said about producing more than the competitive output.

-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

In the long-run equilibrium in perfect competition,consumer surplus is

-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.Suppose a free market exists.An import quota of Q₂ units would

In 2007,the National Collegiate Athletic Association put a moratorium on new Football Bowl Series (formerly Division IA)teams.This policy will

Ann and Bill each spend $30 per month on cigarettes when the price is $1 per pack.Draw a graph to illustrate that the consumer with the less elastic demand will suffer the greater loss of consumer surplus when the price of cigarettes increases.Explain and label the figure.