Exam 9: Applying the Competitive Model

-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 welfare loss of this price support is

A minimum wage is an example of a

Explain why the competitive output maximizes welfare.

Assume a consumer has a horizontal demand curve for a product.His consumer surplus from buying the product

A ban on imports,a tariff,or a quota raises the price to domestic consumers.This means that consumers will buy less of the product at a higher price.The loss associated with this is called

-The above figure shows supply and demand curves for apartment units in a large city.At the unregulated equilibrium,producer surplus will be

-The above figure shows the demand and supply curves in the market for milk.Currently,the market is in equilibrium.If the government imposes a $2 per gallon tax to be collected from sellers,calculate the dead weight loss associated with the tax,and explain why the dead weight loss occurs.

If a city decides to restrict the number of pizza parlors,

-The domestic demand curve,domestic supply curve,and world supply curves for a good are given in the above figure.All the curves are linear.Initially,the country allows imports.Then it imposes a $25 specific tariff.Calculate the deadweight loss generated by this tariff.

"Supporters of import restrictions and protectionist policies place greater weight on producer welfare than on consumer welfare." Comment.

-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

The owners of sports franchises often complain that free-agency (open bidding for player services)threatens their profitability and thus their long-run viability.Given your knowledge of perfect competition,which of the following is correct?

-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 consumer's net gain in surplus equals

Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.This results in a deadweight loss of

A firm that generates zero economic profit usually has

Suppose the market supply curve is p = 5Q.At a price of 10,producer surplus equals

-The domestic demand curve,domestic supply curve,and world supply curves for a good are given in the above figure.All the curves are linear.Initially,the country allows imports.Then imports are banned.Calculate how consumer and producer surplus change because of the ban.Is the country better off with the ban on imports? Why?

An individual's ________ surplus is the area ________ the ________ curve and above the ________ up to the quantity ________.

-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.An import quota of Q₂ units would