Exam 9: Properties and Applications of the Competitive Model

-The above figure shows supply and demand curves for milk.If the government passes a law that establishes $3 per month as the legal minimum per gallon price,consumer surplus will be

-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 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.As a result,consumer surplus falls by

If an economist states that not enough of a good is being produced,she usually means that

-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

Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk.The group argues that such a policy would save the "family farm." Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting price,output and social welfare from such a policy.Compare this result to the competitive equilibrium.

-The above figure shows the market for rice in Japan.S_Domestic represents the domestic supply curve,and S_world represents the world supply curve.If imported rice is banned,the change in domestic producer surplus equals

In the long run,competitive firms MUST be profit maximizers because if they do not maximize profits,

Suppose that all firms in a constant-cost industry have the following long-run cost curve: c(q)= 4q² + 100q + 100 The demand in this market is given by Q^D = 1280 - 2p.Suppose the number of firms in the market is restricted to 80 a.Derive the supply curve with this restriction.Find the market equilibrium price and quantity with the restriction. b.If firms are allowed to buy and sell these permits in an open market,what will be the rental price of permits? Will firm's that own permits make profit? Briefly explain. c.How much deadweight loss is generated by the permit system? Provide a graph showing the region of this deadweight loss. d.Suppose the government abandons the permit system and simply imposes a fixed fee on firms in the market.If the fee is set equal to the permit price you found in c. ,what will be the equilibrium price,quantity,number of firms and deadweight loss?

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.

-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,consumer surplus will be

Firms are ________ with an economic profit of zero,they will ________ in the industry because they ________ be better off in another industry.

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

The deadweight loss associated with output less than the competitive level can be determined by

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.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus decreases by

-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

Tariffs and quotas create a loss in social welfare because

The total welfare associated with a market that includes a government sales tax equals

Which of the following best describes the market reaction if a city restricts the number of firms that are allowed to operate in a market?