Exam 9: Applying the Competitive Model

-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.To maintain the price support,government must purchase

The welfare loss of a tariff equals that of an import quota that leads to the same level of imports.

A competitive market maximizes social welfare because in a competitive market,

-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,producer surplus will be

In a competitive market,the demand and supply curves are Q = 12 - P and Q = 5P,respectively.If output is fixed at Q = 11,what is the amount of the resulting deadweight loss?

-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.Suppose a free market exists.If a $1 per unit tariff is imposed on imported rice,the quantity of imported rice will decrease by

Even if two competitive firms in the same market have different production technologies,they will each earn long-run zero profits.Why?

If lower-income households spend a greater share of their income on cigarettes than do higher-income households,then a tax that raises the price of cigarettes will

Producer surplus is the sum of the profits earned by all firms in a market.

-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 zero,consumer surplus equals

If a market produces a level of output below the competitive equilibrium,then

If a city decides to lift restrictions of how many taxi cabs can operate,social welfare will increase.

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be in a perfectly competitive market?

Long-run economic profit does not exist for fixed factors like land because

-The above figure shows the demand and supply curves in the market for milk.If the government imposes a quota at 500 gallons,calculate the change in the consumer surplus.

-The above figure shows supply and demand curves for milk.If amount Q2 is produced in the market,

-The above figure shows supply and demand curves for milk.In an effort to help farms,the government passes a law that establishes a $3 per gallon price support,but allows farmers to decide how much milk to produce.The government then provides a deficiency payment to guarantee that the farmers receive $3 per gallon.The required deficiency payment equals

-The above figure shows supply and demand curves for milk.Suppose that the government passes a $2 per gallon subsidy.The deadweight loss resulting from this policy will be

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

An increase in the deadweight loss (DWL)means