MICROECONOMICS-ACCESS CARD <CUSTOM>
11th Edition
ISBN: 9781266285097
Author: Colander
Publisher: MCG CUSTOM
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Textbook Question
Chapter 6, Problem 7IP
In 2004, (Congress allocated over $20 billion to tight illegal drugs About 60 percent of the funds was directed at reducing the supply of drugs through domestic law enforcement and interdiction. Some critics of this approach argue that supply-side approaches to reduce the drug supply actually help drug producers.
- a. Demonstrate graphically the effect of supply-side measures on the market for illegal drugs.
- b. Explain how these measures affect drug producers. (Hint Consider the elasticity of
demand .) - c. Demonstrate the effect of demand-side measures such as treatment and prevention on the market for illegal drugs.
- d. How does the shift in demand affect the profitability of producers?
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8. According to the textbook, which of the following statements about drug interdiction is (are) correct?
(x) Higher drug prices caused by drug interdiction policies may cause an increase in drug-related crime
because drug addicts would have a greater need for quick cash.
(y) Drug interdiction shifts the supply curve of drugs to the left, and, as a result, raises prices and total
revenue in the drug market.
(z) Advocates of drug interdiction argue that higher drug prices caused by such policies may discourage
drug experimentation by young people.
(x), (y) and (z)
(x) and (y) only
С.
(x) and (z) only
(y) and (z) only
(y) only
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Consider the public policy aimed at smoking:
(a) Suppose studies indicate that the price elasticity of demand for cigarettes is about 2. If the government is able to increase the
price of a pack of cigarette from $2 to $3 (through may be, higher taxes), by what percentage will the consumption (demand) of
cigarettes decrease? Please show all calculations.
(b) Studies also find that the price elasticity of demand for cigarettes for higher income earners is more inelastic compared to that of
those earning less income. Why might this be true? Please explain your answer
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1. City planners are proposing a 5% increase in all water rates. Prior to adopting this policy, the city
council would like to receive information about the effects on consumers and the water department.
We can rough out some quick and useful estimates using knowledge of an annual demand point
and the price elasticity of demand (remember the point expansion method). Suppose the water
department delivers 180 million gallons per year while taking in $740,000 in revenue per year. Of
this revenue, $520,000 is derived from volumetric (metered) charges, and the remainder comes from
fixed fees such as monthly charges and late fees.
Assume that the price elasticity of water demand is -0.3.
(a) How much will the consumers' total welfare change? Hints:
• Remember the point expansion method, where using the elasticity and a point from on the
demand curve, we can reclaim the entire demand equation.
• Assume a linear demand curve.
• Remember the elasticity formula:
dw P
dp w
• Note that this…
Chapter 6 Solutions
MICROECONOMICS-ACCESS CARD <CUSTOM>
Ch. 6.1 - If when price rises by 4 percent, quantity...Ch. 6.1 - Prob. 2QCh. 6.1 - Prob. 3QCh. 6.1 - Prob. 4QCh. 6.1 - Prob. 5QCh. 6.1 - Prob. 6QCh. 6.1 - Prob. 7QCh. 6.1 - Prob. 8QCh. 6.1 - Prob. 9QCh. 6.1 - Prob. 10Q
Ch. 6 - Determine the price elasticity of demand if, in...Ch. 6 - A firm has just increased its price by 5 percent...Ch. 6 - When tolls on the Dulles Airport Greenway were...Ch. 6 - Prob. 4QECh. 6 - Prob. 5QECh. 6 - Prob. 6QECh. 6 - Prob. 7QECh. 6 - Economists have estimated the following...Ch. 6 - Prob. 9QECh. 6 - A newspaper recently lowered its price from 5.00...Ch. 6 - Once a book has been written, would an author...Ch. 6 - Prob. 12QECh. 6 - Prob. 13QECh. 6 - Suppose average movie ticket prices are 8.50 and...Ch. 6 - Which of the following producers would you expect...Ch. 6 - Prob. 16QECh. 6 - Prob. 17QECh. 6 - Prob. 18QECh. 6 - Prob. 19QECh. 6 - Prob. 20QECh. 6 - Prob. 21QECh. 6 - Prob. 22QECh. 6 - Prob. 1QAPCh. 6 - Prob. 2QAPCh. 6 - Prob. 3QAPCh. 6 - Prob. 4QAPCh. 6 - Prob. 5QAPCh. 6 - Price elasticity is not just a technical economic...Ch. 6 - Prob. 1IPCh. 6 - Prob. 2IPCh. 6 - Prob. 3IPCh. 6 - Prob. 4IPCh. 6 - Prob. 5IPCh. 6 - In 2004, Congress allocated over 20 billion to...Ch. 6 - In 2004, (Congress allocated over 20 billion to...Ch. 6 - Prob. 8IPCh. 6 - Prob. 9IPCh. 6 - Prob. 10IP
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