Exam 9: Applying the Competitive Model

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,the loss in social welfare equals

Before the DVD,the VCR was a popular format for taping and replaying video.When the DVD was introduced,which of the following most accurately describes the long-run adjustment process in the VCR industry?

The tax revenue that is generated by a government tax is counted towards total welfare.

Suppose anyone with a driver's license is capable of supplying one trip from the airport to the downtown business center on any given day.The long-run supply curve of such trips is horizontal at p = $50,which is the average cost of such trips.Suppose daily demand is Q = 1000 - 10p.Calculate the change in consumer surplus,producer surplus and social welfare if the city government requires those people supplying such trips to possess a special license,and the government will issue only 300 licenses.

Ann and Bill each spend $30 per month on cigarettes when the price is $1 per pack.Draw a graph to illustrate that the consumer with the less elastic demand will suffer the greater loss of consumer surplus when the price of cigarettes increases.Explain and label the figure.

Mister Jones was selling his house.The asking price was $220,000,and Jones decided he would take no less than $200,000.After some negotiation,Mister Smith purchased the house for $205,000.Smith's consumer surplus is

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were $2.50,consumer surplus equals

If entry is limited due to a limited input,firms in that market earn long run economic profit.

-The above figure shows the market for rice in Japan where price is expressed in dollars.S represents the domestic supply curve,and the horizontal line at P = $1 represents the world supply curve.If a $1 tariff is imposed on imported rice,the loss in social welfare is

Tariffs and quotas create a loss in social welfare because

In the long-run equilibrium in perfect competition,consumer surplus is

Mister Jones was selling his house.The asking price was $220,000,and Jones decided he would take no less than $200,000.After some negotiation,Mister Smith purchased the house for $205,000.Jones' producer surplus is

-The above figure shows supply and demand curves for milk.If the government passes a $2 per gallon specific tax,the welfare loss will equal

Which of the following is a potential result of a price ceiling?

The welfare loss from an import quota is greater than that of an equivalent tariff because

In 2007,the National Collegiate Athletic Association put a moratorium on new Football Bowl Series (formerly Division IA)teams.This policy will

In the short run,if a firm operates,it earns a profit of $500.The fixed costs of the firm are $100.This firm has a producer surplus of

-The above figure shows supply and demand curves for milk.In an effort to help farmers,the government passes a law that establishes a $3 per gallon price support.The loss in social welfare resulting from this price support equals

-The above figure shows supply and demand curves for apartment units in a large city.The area "e" represents

Suppose a consumer advocacy group has convinced legislators that vitamin pills should be free to consumers.Such a policy would enhance the health of the citizenry,they argue.Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting output and social welfare from such a policy.Compare this result to the competitive equilibrium.