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ECON 1050 Chapter 6: Economics-1 (1) (dragged) 5

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salmoneagle674
17 Sep 2016
School
University of Guelph
Department
Economics
Course
ECON 1050
Professor
Eveline Adomait

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Document Summary

Intervention in markets for farm products take two main forms: production quotas, subsidies. A production quota is an upper limit to the quantity of a good that may be produced during a specified period. A subsidy is a payment made by the government to a producer. With no quota, the price is a tonne and 16 million tonnes a year are produced. With the production quota of 14 million tonnes a year, quantity decreases to 14 million tonnes a year. The market price rises to a tonne and marginal cost falls to a tonne. At the quantity produced: marginal social benefit equal market price, which has increased, marginal social cost has decreased. Production is inefficient and producers have an incentive to cheat. With no subsidy, the price is a tonne and 40 million tonnes a year are produced.

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Related Questions

29) When an effective production quota is applied in the market for wheat, the quantity produced and the price . The marginal social benefit marginal social cost. A) decreases; rises; is less than B) decreases; rises; exceeds C) increases; rises; exceeds D) increases; falls; is less than E) decreases; falls; is less than

A price support leads to inefficiency because


1 output is more than the efficient, equilibrium quantity.

2 the marginal benefit of the last unit produced is larger than the marginal cost.

3 the price charged is less than the equilibrium price.

4 producer surplus is less than consumer surplus.

5 producers must pay a subsidy to the government.


And why, thanks

Use the figure below to answer the following question. Price Idollars per kilogram) 12 10 Ssubside MSB>ME MSBCM 2 bread HC 1 2 3 4 5 Quanhaty billions of kilograms per year) Figure 3 19) Refer to Figure 3. The graph shows the market for tomatoes. When the government introduces a subsidy for tomatoes at S4 a kilogram, the quantity produced is because A7 efficient; marginal social cost is less than marginal social benefit B) inefficient; marginal social cost is less than marginal social benefit inefficient; marginal social benefit is less than marginal social cost D) inefficient, marginal social cost is zero E) efficient, marginal social benefit equals marginal social cost