Homework Answers
Q8) the answer is true. Since the production of coal is giving a negative externality, the optimal social output is lower than the market equilibrium output of coal. To bring the market closer to the socially optimal equilibrium, the government can tax the coal prodcution. This will reduce the equilibrium quantity and the effective price received by sellers. Thus the producer surplus will decease. Since the output is now closer to the socially optimal output, the deadweight loss will aslo decrease.
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True False-Ambiguous and Explain why 8. The equilibrium price of coal is $50 per ton. Coal...
True-False-Ambiguous and Explain why 7. The equilibrium price of coal is $50 per ton. Coal generates...
True-False-Ambiguous and Explain why 7. The equilibrium price of coal is $50 per ton. Coal generates a negative externality of $20 per ton, but then the negative externality increases to $40 per ton. Therefore, consumer surplus will increase and the deadweight loss will grow. Draw a graph.
True False-Ambiguous and Explain why 6. Suppose that a single-price monopolist bought up all the firms...
True False-Ambiguous and Explain why 6. Suppose that a single-price monopolist bought up all the firms in a competitive industry and was able to block new firms from entering. In this case, consumer surplus would fall, a deadweight loss would arise, and the firm would earn positive economic profits. Draw a graph.
Explain why the following statements are true or false: &n
Explain why the following statements are true or false: A: Exporting a good reduces consumer surplus therefore overall economic welfare decreases. B: Importing a good reduces producer surplus therefore overall economic welfare decreases. C: A tariff reduces imports, increases domestic production and producer surplus therefore overall economic surplus increases. D: Export subsidies increase both consumer and producer surplus thereof they improve overall net economic welfare. 4. Explain why the following statements are either true or false: A: In a competitive...
Explain why the following statements are true or false: &n
Explain why the following statements are true or false: 3) A: Exporting a good reduces consumer surplus therefor overall economic welfare decreases. B: Importing a good reduces producer surplus therefore overall economic welfare decreases. C: A tariff reduces imports, increases domestic production and producer surplus therefore overall economic surplus increases. D: Export subsidies increase both consumer and producer surplus thereof they improve overall net economic welfare. . 4) Explain why the following statements are either true or false: A:...
For the questions below, answer either true or false. If you answer true, explain why it...
For the questions below, answer either true or false. If you answer true, explain why it is true. If you answer false, give a counter-example. In all three examples you may assume demand slopes downward and supply slopes upward (that is, neither curve is either perfectly vertical or horizontal), and that both curves are smooth (like they are in the rent control questions, not discrete like they were in homework 2). A. In the simple model of supply and demand...
True-False-Ambiguous and Explain Why 5. Biggie Inc. is a single-price monopoly. If the cost of its...
True-False-Ambiguous and Explain Why 5. Biggie Inc. is a single-price monopoly. If the cost of its raw materials rises by $2 for each unit produced, then it will increase it price by $2 per unit. Draw a graph.
Consider the market for luxury yachts depicted on the following graph. Determine the equilibrium price and...
Consider the market for luxury yachts depicted on the following graph. Determine the equilibrium price and quantity of luxury yachts in the absence of a tax. Using the green triangle (triangle symbols), shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple triangle (diamond symbols) to shade the area on the following graph representing total producer surplus (PS) at the equilibrium price. PRICE (Thousands of dollars per yacht! Supply 0 10 20 Demand 30...
True False-Ambiguous and Explain Why 3. If total fixed costs are $500 per day, labor is...
True False-Ambiguous and Explain Why 3. If total fixed costs are $500 per day, labor is the only variable cost and wages are $100 per worker per day, then the firm with the production data below will shut-down if the price is below $3 per unit. L 0 3 5 6 8 12 Q 0 100 200 300 400 500
True False-Ambiguous and Explain why 2. Carino's, Axe Company operates in a monopolistically competitive market and,...
True False-Ambiguous and Explain why 2. Carino's, Axe Company operates in a monopolistically competitive market and, like most firms in the industry, has been earning an above-normal profit. Therefore, it is likely to increase its price in the future. Draw a graph.
True or false: Any price other than the equilibrium price will always result in less total...
True or false: Any price other than the equilibrium price will always result in less total surplus in the economy, or, equivalently, some deadweight loss.
True-False-Ambiguous and Explain why 7. The equilibrium price of coal is $50 per ton. Coal generates a negative externality of $20 per ton, but then the negative externality increases to $40 per ton. Therefore, consumer surplus will increase and the deadweight loss will grow. Draw a graph.
True False-Ambiguous and Explain why 6. Suppose that a single-price monopolist bought up all the firms in a competitive industry and was able to block new firms from entering. In this case, consumer surplus would fall, a deadweight loss would arise, and the firm would earn positive economic profits. Draw a graph.
For the questions below, answer either true or false. If you answer true, explain why it is true. If you answer false, give a counter-example. In all three examples you may assume demand slopes downward and supply slopes upward (that is, neither curve is either perfectly vertical or horizontal), and that both curves are smooth (like they are in the rent control questions, not discrete like they were in homework 2). A. In the simple model of supply and demand...
True-False-Ambiguous and Explain Why 5. Biggie Inc. is a single-price monopoly. If the cost of its raw materials rises by $2 for each unit produced, then it will increase it price by $2 per unit. Draw a graph.
Consider the market for luxury yachts depicted on the following graph. Determine the equilibrium price and quantity of luxury yachts in the absence of a tax. Using the green triangle (triangle symbols), shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple triangle (diamond symbols) to shade the area on the following graph representing total producer surplus (PS) at the equilibrium price. PRICE (Thousands of dollars per yacht! Supply 0 10 20 Demand 30...
True False-Ambiguous and Explain Why 3. If total fixed costs are $500 per day, labor is the only variable cost and wages are $100 per worker per day, then the firm with the production data below will shut-down if the price is below $3 per unit. L 0 3 5 6 8 12 Q 0 100 200 300 400 500
True False-Ambiguous and Explain why 2. Carino's, Axe Company operates in a monopolistically competitive market and, like most firms in the industry, has been earning an above-normal profit. Therefore, it is likely to increase its price in the future. Draw a graph.
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