Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 2, Problem 2P
To determine
The
Concept Introduction:
Opportunity Cost: Opportunity cost is the opportunity lost by choosing one alternative over the other.
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PROBLEM (5) (tariff) The domestic (US) demand and supply for soy is p = 80 - Qp and p = Qs+ 10
respectively. US market is very small relative to the world market, and the world (equilibrium) price is
$20. Draw one graph for the market marking all intercepts and intersections to help you with (a) and (b)
below.
(a) If there is NO trade, what is the CS, PS, net domestic benefits, DWL?
(b) If there is free trade, what is the CS, PS, net domestic benefits, DWL? How many units are imported?
Now the state imposes a tariff of t dollars per unit.
(c) What should be the tariff amount t to maximize tariff revenues? In this case, what is the DWL?
(d) What should be the tariff amount t so that consumers and producers equally well off (CS equals PS)?
(e) What should be the tariff amount t to maximize PS?
(f) What is the most efficient tariff amount t? What is the least efficient tariff amount t? (i.e. that minimizes
and maximizes DWL respectively.)
Chapter 2 Solutions
Econ Micro (book Only)
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- PROBLEM (5) (tariff) The domestic (US) demand and supply for soy is p = 80 − QD and p = QS + 10 respectively. US market is very small relative to the world market, and the world (equilibrium) price is $20. Draw one graph for the market marking all intercepts and intersections to help you with (a) and (b) below. (a) If there is NO trade, what is the CS, PS, net domestic benefits, DWL?(b) If there is free trade, what is the CS, PS, net domestic benefits, DWL? How many units are imported? Now the state imposes a tariff of t dollars per unit.(c) What should be the tariff amount t to maximize tariff revenues? In this case, what is the DWL?(d) What should be the tariff amount t so that consumers and producers equally well off (CS equals PS)? (e) What should be the tariff amount t to maximize PS?(f) What is the most efficient tariff amount t? What is the least efficient tariff amount t? (i.e. that minimizes and maximizes DWL respectively.)arrow_forward2arrow_forward22. The United Kingdom is made up of several smaller countries that used to be independent. The largest is England and one of the smallest, Wales, became unified with England around 700 years ago. The land in most of England is relatively fertile and can be used to grow wheat or pasture sheep. Wales, on the other hand, is mountainous and it is hard to grow wheat or find good land on which to pasture sheep, although it can be done. The land costs of producing wheat and sheep are shown below. Wheat 5 acres/ton 10 acres/ton Sheep 2 acres/sheep 2.5 acres/sheep England Wales For simplicity suppose England has 20 acres and Wales has 10 acres. Now suppose that England conquers Wales and the king wants his economist, to plot out the production possibilities for his unified kingdom. Do not expect the PPF to be a straight line, so plot more than two points. It will be helpful to consider the different patterns of specialization below and plot the points. Fill in the table Production pattern…arrow_forward
- 22. The United Kingdom is made up of several smaller countries that used to be independent. The largest is England and one of the smallest, Wales, became unified with England around 700 years ago. The land in most of England is relatively fertile and can be used to grow wheat or pasture sheep. Wales, on the other hand, is mountainous and it is hard to grow wheat or find good land on which to pasture sheep, although it can be done. The land costs of producing wheat and sheep are shown below. Wheat England Wales 5 acres/ton 10 acres/ton Sheep 2 acres/sheep 2.5 acres/sheep For simplicity suppose England has 20 acres and Wales has 10 acres. Now suppose that England conquers Wales and the king wants his economist, to plot out the production possibilities for his unified kingdom. Do not expect the PPF to be a straight line, so plot more than two points. It will be helpful to consider the different patterns of specialization below and plot the points. Fill in the table Production pattern…arrow_forwardSophia ✓ My Home Courses WyoWeb Catalog and Study Tools Rental Options College Success Tips Career Success Tips ? Help « Give Feedback CENGAGE MINDTAP Homework (Ch 09) 4. Effects of a tariff on international trade PRICE (Dollars per ton) 525 495 465 The following graph shows the domestic supply of and demand for maize in Sudan. The world price (Pw) of maize is $255 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 435 405 375 345 315 285 Homework (Ch 09) 255 225 0 10 20 Domestic Demand Domestic Supply x 40 50 60 70 QUANTITY (Tons of maize) music ✓ cody ✓ Engl 1010 Wyo bSearch results for 'The following graph s... 30 ng.cengage.com…arrow_forwardM4. Rani lives and works in downtown Toronto. She pays $500 a week in rent. Her job pays her $20 an hour. She can choose how many hours to work a week, but she has to be present in the office to do her job. She works in the same building that she lives so her commuting time is zero. a) If she does not rent her current apartment, she could rent an apartment in Guelph for $300 a week but will need to spend 3 hours a day (total) commuting to downtown Toronto, 5 days a week. Assume Rani values both apartments and living situations the same. What is Rani's Opportunity Cost of renting her current apartment in downtown Toronto? Explain your reasoning clearly and show all the steps in your working.. b) Suppose Rani's wage decreases. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working. c) Suppose Rani's job moves online. She is no longer required to be present in the office to do her job. Does this affect her decision to live…arrow_forward
- opportunity cost of producing a product from zeroarrow_forwardQuestion Analyze a recently published article which deals with globalization or trade policy. Pay special attention to the winners and losers of this event. What role did/do special interests play in the implementation of this policy? Please include a supply-demand graph related to this event created on the computer. **Please Type out answers, Thank youarrow_forward20 The opportunity cost of receiving $100 next year as opposed to getting $100 today is: the foregone interest that could be earned if you had the money today. the taxes paid on any earnings. the value of $100 relative to the total income of that person. the value of $100 relative to the total income of all persons.arrow_forward
- Question: Which of the following best describes the concept of opportunity cost in economics? A) The total cost of producing a good or service B) The monetary cost of purchasing a good or service C) The value of the next best alternative forgone when a decision is made D) The additional cost incurred when producing one more unit of a good or servicearrow_forwardBackground Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy. You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursuit a policy of import substitution industrialization (ISI). You are given a brief about Ghana highlighting the following points: About half of Ghana’s population depends on agriculture, but Ghana still imports some of its food. The majority of Ghana's people live in rural areas and exist on a subsistence way of life. Ghana has one of the highest rates of income inequality in the world. Nearly half of the population is employed in agriculture. Explain import substitution industrialisation and how it can affect Ghana. What role does learning by doing play and when does it make sense for the government to interfere?arrow_forwardTyped answer.arrow_forward
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