Exam 10: Using the Competitive Model

An excise tax levied on firms in a constant-cost competitive industry will:

If a good is produced by an increasing-cost competitive industry and the demand for its product is elastic,the imposition of a per-unit tax on producers will cause price to _____ in the short run.

A government study concludes that excessive alcohol consumption is due to the low price of alcohol in the market.In order to reduce the consumption of alcohol,the government wishes to set a price floor above the equilibrium price of alcohol.Explain whether this policy would have its intended effect.What is the net loss or gain from the price floor?

The total surplus gained by all the participants in a competitive market is the area between the _____ up to the equilibrium level of output.

In 2002,the U.S.imposed higher tariffs on steel imports to save American jobs.How did these tariffs reduce U.S exports?

The following figure shows the intersection of the demand and supply curves for a commodity in the domestic market at price P₂ and quantity Q₂,in the absence of trade.With trade,the supply curve shifts to Supply_trade. Figure 10-4 -Refer to Figure 10-4.When foreign suppliers enter the domestic market the total consumer surplus becomes _____.

When the efficient rate of output is produced in the short run:

The following figure shows the intersection of the demand and supply curves for a commodity in the domestic market at price P₂ and quantity Q₂,in the absence of trade.With trade,the supply curve shifts to Supply_trade. Figure 10-4 -Refer to Figure 10-4.The quantity of imports into the domestic market is given by _____.

The following figure shows the effect of a price ceiling in the market for yams.The market was initially in equilibrium at price P₂ and quantity B. Figure 10-1 -In Figure 10-1,the aggregate producer surplus at the initial point of equilibrium,F,is area _____.

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. Figure 10-3 -In Figure 10-3,the total producer surplus after trade is _____.

Deregulation of the airline industry has resulted in:

Which of the following correctly identifies the effect of an import quota on a good?

The following figure shows the intersection of demand and supply at the price P₂ and quantity Q₂ in a competitive market. Figure 10-2 -Refer to Figure 10-2.What is the consumer surplus at the equilibrium level of output?

The following figure shows the intersection of the demand and supply curves for a commodity in the domestic market at price P₂ and quantity Q₂,in the absence of trade.With trade,the supply curve shifts to Supply_trade. Figure 10-4 -Refer to Figure 10-4.In the absence of trade,the total producer surplus is given by _____.

The following figure shows the domestic U.S.market for bananas and the global market for bananas.The domestic supply curve is given by SUPPLY_US.With free trade,the equilibrium output in the U.S.market is Q.The import quota imposed by the government is equal to 0A. Figure 10-5 -Refer to Figure 10-5.The price of bananas in the global market prior to the imposition of an import quota is _____.

Which of the following strengthens the possibility that the airline market is a contestable market?

The following figure shows the effect of a price ceiling in the market for yams.The market was initially in equilibrium at price P₂ and quantity B. Figure 10-1 -In Figure 10-1,the net change in total surplus due to a price ceiling set at P₃ is _____.

Suppose the demand for some good can be estimated using the equation Q_D = a - bP,and the supply can be estimated using the equation Q_S = c + dP,where a is the intercept and b is the slope of the demand curve,and c is the intercept and d is the slope of the supply curve.P is the equilibrium price in the market. ( A)If a per-unit excise tax of size T were imposed on each unit of this good sold in the market,show that the percentage of the tax born by the consumer is $\frac { d } { ( b + d ) }$ ,and the percentage of the tax born by the supplier is $\frac { - b } { ( b + d ) }$ . [Hint: The tax (T)is equal to the price the consumer pays (i.e. ,P_D)minus the price received by the supplier (P_S).Therefore,T = P_D - P_S.Rearrange and substitute into one of the equations above.]

The following figure shows the domestic U.S.market for bananas and the global market for bananas.The domestic supply curve is given by SUPPLY_US.With free trade,the equilibrium output in the U.S.market is Q.The import quota imposed by the government is equal to 0A. Figure 10-5 -Refer to Figure 10-5.Which of the following should necessarily be true?

In which of the following cases is it likely that the entire U.S.domestic demand for corn is met through imports?