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The government has identified four markets that they would like to intervene in to help domestic producers. However, they can only aid producers in one market. You've been hired to analyze four different options (each policy is to be applied to a separate market) and help the government decide which market to assist. Their goal is to select the policy that leads to the largest increase in producer surplus. Calculate the change in producer surplus for each of the four markets. Which market should the government intervene in? If necessary, round all calculations to 2 decimal places. Assume it is possible to produce partial units of output in each industry. Option A: market for rice • This is a closed-economy market. • The government is providing a per-pound subsidy of $7. • Market demand: P(Q) = 70- -D; Market supply: P(Q) = Qs - 9/ Option B: market for beans • This is an open-economy market with a world price of $4. The government will introduce a $8 tariff. • Market demand: P(Q) = 32 - QD; Market supply: P = 05-8 Option C: market for wheat • This is an open-economy market with a world price of $12. • The government will introduce an import quota of 12 units. • Market demand: P(Q) = 72-20D; Market supply: P = 30s - 27

The government has identified four markets that they would like to intervene in to help domestic producers. However, they can only aid producers in one market. You've been hired to analyze four different options (each policy is to be applied to a separate market) and help the government decide which market to assist. Their goal is to select the policy that leads to the largest increase in producer surplus. Calculate the change in producer surplus for each of the four markets. Which market should the government intervene in? If necessary, round all calculations to 2 decimal places. Assume it is possible to produce partial units of output in each industry. Option A: market for rice • This is a closed-economy market. • The government is providing a per-pound subsidy of $7. • Market demand: P(Q) = 70- -D; Market supply: P(Q) = Qs - 9/ Option B: market for beans • This is an open-economy market with a world price of $4. The government will introduce a $8 tariff. • Market demand: P(Q) = 32 - QD; Market supply: P = 05-8 Option C: market for wheat • This is an open-economy market with a world price of $12. • The government will introduce an import quota of 12 units. • Market demand: P(Q) = 72-20D; Market supply: P = 30s - 27

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The government has identified four markets that they would like to intervene in to help domestic producers. However, they can only aid producers in one market. You've been hired to analyze four different options (each policy is to be applied to a separate market) and help the government decide which market to assist. Their goal is to select the policy that leads to the largest increase in producer surplus. Calculate the change in producer surplus for each of the four markets. Which market should the government intervene in? If necessary, round all calculations to 2 decimal places. Assume it is possible to produce partial units of output in each industry. Option A: market for rice • This is a closed-economy market. • The government is providing a per-pound subsidy of $7. • Market demand: P(Q) = 700D; Market supply: P(Q) = = 105-9/1 Option B: market for beans. • This is an open-economy market with a world price of $4. • The government will introduce a $8 tariff. • Market demand: P(Q) = 32 - OD; Market supply: P =Qs - 8 Option C: market for wheat • This is an open-economy market with a world price of $12. • The government will introduce an import quota of 12 units. • Market demand: P(Q) = 722QD; Market supply: P = 30s - 27 Option D: liquor market . This is a closed-economy market. • The government is already applying a $5 tax to each bottle of liquor. Their policy to help domestic firms is to reduce the tax amount by $2, so that the new tax amount is $3 per bottle. • Hint: you need to solve for two equilibriums: equil with $5 tax, equil with $3 tax • Market demand: P(Q) = 75- QD; Market supply: P = 4 + 1/ 0s
Transcribed Image Text:The government has identified four markets that they would like to intervene in to help domestic producers. However, they can only aid producers in one market. You've been hired to analyze four different options (each policy is to be applied to a separate market) and help the government decide which market to assist. Their goal is to select the policy that leads to the largest increase in producer surplus. Calculate the change in producer surplus for each of the four markets. Which market should the government intervene in? If necessary, round all calculations to 2 decimal places. Assume it is possible to produce partial units of output in each industry. Option A: market for rice • This is a closed-economy market. • The government is providing a per-pound subsidy of $7. • Market demand: P(Q) = 700D; Market supply: P(Q) = = 105-9/1 Option B: market for beans. • This is an open-economy market with a world price of $4. • The government will introduce a $8 tariff. • Market demand: P(Q) = 32 - OD; Market supply: P =Qs - 8 Option C: market for wheat • This is an open-economy market with a world price of $12. • The government will introduce an import quota of 12 units. • Market demand: P(Q) = 722QD; Market supply: P = 30s - 27 Option D: liquor market . This is a closed-economy market. • The government is already applying a $5 tax to each bottle of liquor. Their policy to help domestic firms is to reduce the tax amount by $2, so that the new tax amount is $3 per bottle. • Hint: you need to solve for two equilibriums: equil with $5 tax, equil with $3 tax • Market demand: P(Q) = 75- QD; Market supply: P = 4 + 1/ 0s
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