1. The demand for steel ingots is given by the following: p=150-0.5*Q. The private marginal cost of steel producers is given by the following: MC=50+0.5Q. In addition, there is an external cost of steel production (E) to residents who live near the steel mill where E=Q. A Pigouvian tax of _______ on steel production will ensure the efficient outcome is achieved
2. Assume that the domestic demand for cars is given by Qd=14000-2P and the domestic supply of cars is given by Qs=P-1000. Further assume that the world price for cars is given by $6000. In the presence of international trade the price in the domestic market exchanged is ______ and consumer surplus is equal to ________
3. Which of the following statements is true?
(a) A monopolist that practices perfect price discrimination results in a deadweight loss relative to a perfectly competitive market.
(b) A monopolist that practices perfect price discrimination will choose an output level where marginal revenue is equal to marginal cost to maximise profit.
(c) A monopolist practising perfect price discrimination will choose a level of output lower than that which occurs in a perfectly competitive market.
(d) For a monopolist practising perfect price discrimination, marginal revenue is less than price for every unit sold.
(e) All of the above are true.
4. Assume that the domestic demand for cars is given by Qd=14000-2P and the domestic supply of cars is given by Qs=P-1000. Further assume that the world price for cars is given by $6000. When international trade is possible, the change in total surplus is equal to ____ compared to the situation when there is no trade:
Answer
(a) 0, (b) 1,500,000, (c) 3,000,000, (d) 13,500,000, (e) None of the above.
5. The demand for steel ingots is given by the following: p=150-0.5*Q. The private marginal cost of steel producers is given by the following: MC=50+0.5Q. In addition, there is an external cost of steel production (E) to residents who live near the steel mill where E=Q. If the market for steel ingots is competitive the deadweight loss to society is equal to:
Answer
(a) 0, (b) 1250, (c) 2500, (d) 5000, (e) 7500
6. Bob has a demand curve for public broadcasting (denoted by G) given by the following: G = 9 - 0.5p. Similarly, Christine has a demand curve given by the following: G= 7 - p. Assume that the marginal cost of providing every hour of broadcasting is equal to 10. The efficient number of hours supplied equals:
Answer
(a) 0, (b) 4, (c) 5, (d) 7, (e) 10
7. The demand for vaccinations is given by the following: Q=200-2p. The supply of vaccinations is given by: p=22+0.25Q. Further, vaccinations provide an external benefit (b) equal to b=0.25*Q. If the quantity of vaccinations are determined by a competitive market the deadweight loss relative to the efficient level will be equal to:
Answer
(a) 0, (b) 28, (c) 52, (d) 572, (e) 676
8. Bob has a demand curve for public broadcasting (denoted by G) given by the following: G = 9- 0.5p. Similarly, Christine has a demand curve given by the following: G= 7 -p. Assume that the marginal cost of providing every hour of broadcasting is equal to 10. In a competitive equilibrium the number of hours supplied equals:
Answer
(a) 0, (b) 4, (c) 5, (d) 7, (e) None of the above.
9. Assume that the domestic demand for cars is given by Qd=14000-2P and the domestic supply of cars is given by Qs=P-1000. In the absence of international trade the quantity exchanged is ______ and total surplus is equal to _________:
Answer
(a) 4000; 12,000,000, (b) 4000; 24,000,000, (c) 5000; 12,000,000, (d) 5000; 15,000,000, (e) 4000; 24,000,000
10. Australia is a small open economy (a price taker) that imports televisions, an internationally traded commodity. Suppose the demand for TVs in Australia rises by 10 per cent. The domestic price of TVs ______ and imports _______.
Answer
(a) falls, increase, (b) falls, decrease, (c) remains unchanged, increase, (d) remains unchanged, decrease, (e) none of the above.
11. Which of the following statements is true?
Answer
(a) A public good can be characterised as an externality because individuals compare only the private marginal benefits and costs when deciding how much to purchase.
(b) A public good is non excludable.
(c) A public good is non rivalrous.
(d) a and b are correct but c is incorrect.
(e) a, b and c are correct.
12. The demand for steel ingots is given by the following: p=150-0.5*Q. The private marginal cost of steel producers is given by the following: MC=50+0.5Q. In addition, there is an external cost of steel production (E) to residents who live near the steel mill where E=Q. If the market for steel ingots is competitive the socially optimal level of steel production is:
Answer
(a) 0, (b) 25, (c) 100, (d) none of the above
13. Which one of the following is true for a competitive market?
Answer
(a) For a private good everyone can consume the same amount but the marginal valuation on the last item consumed may be different for different individuals.
(b) For a private good everyone can consumes a different amount and the marginal valuation on the last item consumed is different for different individuals.
(c) For a public good everyone consumes the same amount and the marginal valuation on the last item consumed is the same for all individuals.
(d) For a public good everyone consumes a different amount and the marginal valuation on the last item consumed is the same for all individuals.
(e) None of the above.