35. Suppose the government opens the border to free trade in widgets and foreign suppliers have a perfectly elastic supply at a price of $40 per unit. As a result the dollar value of widget imports i
35. Suppose the government opens the border to free trade in widgets and foreign suppliers have a perfectly elastic supply at a price of $40 per unit. As a result the dollar value of widget imports i
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
35-37. The market for widgets has the following supply and demand curves:
Supply: P = 10 + (1/3)Q
Demand: P = 100 – (1/2)Q
Initially, the market is in equilibrium at P = $46, Q = 108. Questions 35 through 37 concern this
market.
35. Suppose the government opens the border to free trade in widgets and foreign suppliers have a
perfectly elastic supply at a price of $40 per unit. As a result the dollar value of widget imports is:
A) $0 B) $40 C) $3600 D) $4800 E) $1380
F) $1200 G) $5520 H) $4140 I) $2400 J) none of the above
36. As a result of trade (rounded to the nearest dollar) the gain to society has changed by:
A) -$684 B) +$684 C) -$594 D) +$594 E) -$90 F) +$90
G) -$1278 H) +$1278 I) $0 J) None of the above
37. Suppose a new study comes out that identifies widgets as a source of a health hazard, exposure
to them causes cancer. The study estimates that the total global external cost of widget production
and consumption is given by the following expression:
Now determine (rounded to the nearest dollar) the total gain to society (not the change in gain to
society) after free trade:
A) $1350 B) $3600 C) $2400 D) $2500 E) $2550 F) $6000
G) $7350 H) $4950 I) $4860 J) None of the above
2
6
1 QTEC
Page 13 of 14
38-39. In a small and isolated community, there are 25 consumers, each of whom has the following
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