A. mango Supply and Demand for a tropical country are given by ;
Demand: P = 50 - (QM and supply: P = 25 + (QS) where QD = quantity demanded of mangoes and QS = quantity supplied of mangoes
1. Draw the market supply and demand curves. What are the efficient price and efficient quantity?
2. Show on your graph consumer surplus and producer surplus and calculate the values of consumer surplus and producer surplus.
3. The government decides to impose a price ceiling of 535. Illustrate graphically the different economics effects of such intervention in this market.
4. Compute the deadweight loss generated by the government intervention and the new producer surplus .
5. instead of a price ceiling the government provides a subsidy of $5 to consumers, illustrate graphically the economics effects of this intervention.
6. Compute the deadweight loss and provide two examples of price ceiling and a subsidy to consumers in the real world.
7. Assume that the government levied a 25% tax on the suppliers of mangoes. Illustrate graphically the different economics effects of the tax ( and compute the dwl and tax burden ).
8. The government decides to impose a price floor of $40. Illustrate graphically the different economics effects of such intervention in this market.
9. Compute the deadweight loss generated by the government intervention and the producer surplus.
10. What are the characteristics of a perfect competitive market?
11. Assume that the production of the good generates a positive externality since eating mangoes is healthy. If the external benefit is 1/2 (Q), determine the efficient level of output.
12. Is there a market failure in this market? Why?
13. Illustrate graphically the market failure and compute the value of the market failure.
14. Explain how a positive externality can be generated in a perfect competitive market.
Exam II
II. A. Steel Supply and Demand for USA
|
Price
|
Quantity Supplied
|
Quantity Demanded
|
|
0
|
0
|
12
|
|
200
|
2
|
10
|
|
400
|
4
|
8
|
|
600
|
6
|
6
|
|
800
|
8
|
4
|
|
1000
|
10
|
2
|
|
1200
|
12
|
0
|
1. Draw the market supply and demand curves. What are the equilibrium price and equilibrium quantity?
2. Show on your graph consumer surplus and producer surplus and calculate the values of consumer surplus and producer surplus.
3. The government decides to impose a price floor of $1000. Illustrate graphically the different economics effects of such intervention in this market.
4. Compute the deadweight loss generated by the government intervention and the new consumer surplus .
5. Instead of a price floor the government provides a subsidy of $300 to suppliers, illustrate graphically the economics effects of this intervention.
6. Compute the deadweight loss and provide two examples of price ceiling and a subsidy to consumers in the real world.
7. Explain the law of demand and the law of supply.
8. Why some economists oppose the Affordable Health Care Act? Provide specific economic arguments.