ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 5, Problem 4RQ
To determine
Relevance of sugar tax.
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Before Cyprus joined the EU there was an import tariff on imported fresh meat from the EU of €1.00 per Kg at a selling price of €6.00 per kg. The total annual Demand was 20m kgs (20,000tons) per year while when the tariff was lifted (after the accession to the EU) the annual demand increased to 260m kgs (260,000tons). At the €6.00 per kg price, domestic supply has been half of the total annual supply while when the tariff was lifted this was reduced by 20%.
Calculate:
The total increase in consumer surplus due to the abolition of the tariff.
The total amount of the tariff revenue that had been lost.
The change in the domestic and foreign producer surplus.
Suppose that the world price of oil is roughly $50.00 per barrel and that the world demand and total world supply of oil equal 34 billion barrels per year (bb/yr), with a competitive supply of 20 bb/yr and 14 bb/yr from OPEC.
Statistical studies have shown that the long-run price elasticity f demand for oil is -0.40, and the long-run competitive price elasticity of supply is 0.40. Using this information, derive linear demand and competitive
supply curves for oil.
Let the demand curve be of the general form Q = a - bP and the competitive supply curve be of the general form Q = c+dP, where a, b, c, and d are constants.
The equation for the long-run demand curve is
O A. Q=47.50 -0.27P.
O B. Q=13.50 -0.27P.
OC. Q=47.50-P
O D. Q=47.50+ 0.27P.
O E. Q=13.50-47.50P.
The equation for the long-run competitive supply curve is
O A. Q=12.00 + 47.50P.
OB. Q=12.00 -0.16P.
OC. Q 8.00+ 0.16P.
O D. Q=8.00+ 0.27P.
O E. Q=12.00 +0.16P.
In recent years, the government of Pakistan has established a support price for wheat of about $0.20 per kilogram of wheat. At this price, consumers are willing to purchase 10 billion kilograms of wheat per year, while Pakistani farmers are willing to grow and harvest 18 billion kilograms of wheat per year. The government purchases and stores all surplus wheat.
Suppose that the market-clearing price of Pakistani wheat in the absence of price supports is equal to $0.10 per kilogram. At this price, the quantity of wheat demanded is 12 billion kilograms. Under the government wheat price-support program, how much more is spent each year on wheat harvested in Pakistan than otherwise would have been spent in an unregulated market for Pakistani wheat?
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- During the 1980s, most of the world’s supply of lysine was produced by a Japanese company named Ajinomoto. Lysine is an essential amino acid that is an important livestock feed component. At this time, the United States imported most of the world’s supply of lysine—more than 30,000 tons—to use in livestock feed at a price of $1.65 per pound. The worldwide market for lysine, however, fundamentally changed in 1991 when U.S.-based Archer Daniels Midland (ADM) began producing lysine—a move that doubled worldwide production capacity. Experts conjectured that Ajinomoto and ADM had similar cost structures and that the marginal cost of producing and distributing lysine was approximately $0.70 per pound. Despite ADM’s entry into the lysine market, suppose demand remained constant at Q = 208 − 80P (in millions of pounds). Shortly after ADM began producing lysine, the worldwide price dropped to $0.70. By 1993, however, the price of lysine shot back up to $1.65. Use the theories discussed in this…arrow_forwardThe domestic demand (Qpp) for wheat in the United States is estimated to be QDD=1430-55P, where the quantity of wheat is measured in millions of bushels per year. Suppose China also demands U.S. wheat (Qpc) and that its demand is given by QDc=1920-60P. What is the total demand for U.S. wheat, assuming the only two sources of demand are domestic and Chinese? The total demand for U.S. wheat is OA. Qp =3350-115P for all P. O B. Q =3350-115P for P≤ $26 and Qp = 1920-60P for P> $26. OC. Q=1920-60P for all P. O D. Q =3350-115P for P ≤ $32 and Qp =1430-55P for P> $32 E. Q =3350-115P for P≤ $26 and Qp =1430-55P for P> $26.arrow_forwardThe domestic demand (Qpp) for wheat in the United States is estimated to be Q00 1430-55P. where the quantity of wheat is measured in millions of bushels per year. Suppose China also demands U.S. wheat (Qoc) and that its demand is given by Qọc =2100 -100P What is the total demand for U.S. wheat, assuming the only two sources of demand are domestic and Chinese? The total demand for U.S. wheat is O A. Qp 1430-55P for all P. O B. Qp =3530- 155P for P S $26 and Qp =2100-100P for P> $26. OC. Qp = 3530 - 155P for Ps $21 and Qp =2100 - 100P for P> $21. O D. Qp =3530 - 155P for Ps$21 and QD = 1430-55P for P>$21. O E. Qp = 3530 - 155P for all P.arrow_forward
- Question-05: A vegetable fiber is traded in a competitive world market, and the world price is $9 per pound. Unlimited quantities are available for import into the United States at this price. The U.S. domestic supply and demand for various price levels are shown as follows: U.S. Supply (Million LBS) U.S. Demand Price (Million LBS) 3 34 6 4 28 9. 22 12 8 16 15 10 10 18 12 4 What is the equation for demand? What is the equation for supply? а. b. At a price of $9, what is the price elasticity of demand? What is it at a price of $12? What is the price elasticity of supply at $9? At $12? c. In a free market, what will be the U.S. price and level of fiber imports? d.arrow_forwardSteel is produced only in the US and the rest of the world (ROW). The inverse demand and supply in the US are p = 110 - Q9 and p = 20 + Qi, while in the ROw, they are p = 70 - Q% and p = QR. All quantities are in millions of tons and all prices are in dollars per ton. Since steel is produced more cheaply in the ROW, the US imports it from the ROW under international trade. At any price, p, the imports of the US, QM, is the excess demand for steel given by the difference between the quantity demanded and the quantity supplied domestically in the US: QM = Q8 - Qi. Similarly, the exports of the ROW, QE, is the excess supply of steel given by the difference between how much they produce and how much they demand: QE = Q2 - Qg.arrow_forwardAssume that the domestic supply curve for crude oil is S(P) = 5P and the domestic demand curve for crude oil is D(P)=500-20P. Further assume that domestic oil refiners face a perfectly elastic supply of oil imports at P = 16. a. Derive the domestic price, the quantity processed by domestic oil refiners, and the amount of imports at the competitive equilibrium. Show the results on a well-labeled graph. Now suppose that the domestic crude oil suppliers face a price ceiling of 8. Further suppose that for each two units of crude oil purchased, a domestic oil refiner gets one entitlement to domestic crude oil. Derive the marginal price of crude oil faced by domestic oil refiners. Add this to the graph in part (a). Derive the effect of regulation on the amount of crude oil processed by domestic oil refiners and the amount of imports. Show this on the graph from part (a). Derive the welfare effect of regulation on U.S. Shade in the welfare losses in the graph for part (a).arrow_forward
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