🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Economics
8
answers
0
watching
149
views
20 Nov 2018

Following equations characterize demand and domestic supply for sugar in the U.S.:

QD = 29: 73 - 0.19P and QS = -7: 95 + .66P . In 2011, imports were limited to 6.9

billion pounds, which pushed the domestic price to 36 cents per pound. Suppose imports were

expanded to 10 billion pounds.

(a) What would be the new U.S. domestic price? (Hint: The difference between the domestic

quantities demanded and supplied, QD - QS , is equal to the quota)

(b) How much would consumers gain and domestic producers lose?

(c) What would be the eect on deadweight loss and foreign producers?

Watch
8
answers
0
watching
149
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Keith Leannon
Keith LeannonLv2
20 Nov 2018
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

In 2013, U.S. sugar imports are restricted by way of an import quota. The domestic sugar price is kept above the world market price of sugar by way of a federal domestic price guarantee. A special feature of the sugar import quota is that the rights to sell the sugar in the united states are allocated to the governments of foreign nations, who then allocate these rights to their own residents, just like a voluntary export restraint.

The quantity demanded was estimated to be 5.7 million tons, the quantity supplied was 2.7 million tons, and the price was $426 per ton when the quota was in effect. Also estimated (with free trade) was the world market price of $275 per ton of sugar, the quantity demanded would be 6.9 million tons, and the quantity supplied would be about 1.8 million tons of sugar per year.

In 2013, the size of the U.S. population was about 316 million. In the same year, the sugar industry employed about 6,500 workers. Assume the U.S. is a "small nation" when it comes to sugar imports.

a. what is the total dollar amount the U.S. loses or gains from imposing the import quota? How much of this amount is earned by foreigners?

b. How much did the sugar quota cost or benefit the average U.S. consumer (assuming each resident was a sugar consumer)?

c. What was the implicit subsidy per worker, based on the impact of the import quota on sugar producers?

Under a binding price ceiling, what does the change in consumer surplus represent?
A) The gain in surplus for those buyers who can still purchase the product at the lower price.
B) The loss in surplus for those buyers who previously purchased some units of the good at the higher price, but these units are no longer produced at the lower price.
C) The loss in surplus for those buyers who would like the purchase the excess demand created by the price ceiling policy.
D) Both A and B are correct.
E) Both A and C are correct.

When the market price is held above the competitive level, the deadweight loss is composed of:

A) producer surplus losses associated with units that used to be traded on the market but are no longer exchanged.

B) consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
C) producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
D) There is no deadweight loss if the government uses a price floor policy to increase the price.

Compared to a tariff, an import quota, which restricts imports to the same amount as the tariff, will leave the country as a whole
A) worse off than a comparable tariff.
B) not as bad off as a comparable tariff.

C) about the same as a comparable tariff.

D) Any of the above can be true.

What is the welfare impact of a subsidy policy?
A) Producer surplus increases, consumer surplus declines, and total welfare declines.
B) Producer and consumer surplus increase, and these gains are larger than the government cost.

C) Producer and consumer surplus increase, and these gains are smaller than the government cost.

D) Producer surplus increases, consumer surplus declines, and total welfare increases due to the subsidy program.

Why is there a deadweight loss associated with subsidy payments?
A) There is no deadweight loss from a subsidy.
B) Quantity supplied is less than the equilibrium amount, so consumers and producers lose surplus value on those units that are no longer produced.
C) Quantity supplied exceeds the equilibrium amount, and consumer willingness to pay for these additional units is smaller than the marginal cost of producing them.
D) The subsidy payment does not distort quantities in the market, but the government cost exceeds consumer willingness to pay for the quantity demanded.

Related Documents

ECO 304K Chapter Notes -Feeling, Rational Ignorance, Business Cycle
champagnefly476
ECO200Y5 Chapter Notes - Chapter 3: Price Ceiling, Economic Surplus, Demand Curve
silvercockroach865
ECO102H1 Chapter Notes - Chapter 10: Loanable Funds, Government Budget Balance, Balanced Budget
silvercat376

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in