ID_________ Name ___________
Q1. The world price of a gadget is $300 per unit, and the demand function for a small open country is P = 1300 – 0.5Q, and the supply function is P = 100 + 0.5Q.
If import quantities were to be limited to 800 units through tariffs, (1) how much tariff would have to be imposed per unit? And (2) how much will the government revenue be?
Q2. The domestic demand curve for computers in a certain country is P = 600 – 2Qd, the domestic supply curve is P = 2Qs, and the world price of computers is 150. Answer the following questions if the government imposes a tariff of 50 per imported computer to protect domestic computer manufacturers.
(1) Find number of computers imported after tariff.
(2) Find consumer surplus after tariff.
(3) Find producer surplus after tariff.
(4) Find deadweight loss after tariff.
Q3. Suppose in a certain industry which causses external diseconomies demand curve is given as P = 100 – Q , supply curve is given as P = 10 + Q .
(1) Find the equilibrium price and quantity in this industry without government intervention.
(2) Government believes this industry produces too much and consequently causes negative externality. Government sets the optimum quantity of production to 20. How much tax per unit should be levied to achieve this optimum quantity level?
(3) Find the amount of welfare loss without government intervention.
Q4. University education is known for providing external economies. Suppose demand curve shows benefits to consumers, in university education market demand curve is given as P = 600 – 15Q. Here, Q stands for the number of students. Government estimates external benefit of 150 is created per one student. Supply curve is given P=15Q.
(1) Find the equilibrium number of students without government intervention.
(2) Find the optimum number of students which maximize social welfare.
(3) Find the amount of Pigouvian subsidy to achieve optimum number of students.
Q5. Suppose there are 4 corporations named A, B, C and D. Pollution emission amount and pollution reduction cost provided as follows. Government wants to reduce pollution emission amount by half. Government gives away 20 emission permits for each company which allows to emit 1 ton of pollution per each month.
(1) If each company allows to buy and sell emission permit in the market freely, find the emission permit price.
(2) Find the total social cost under emission permit policy. Find the total social cost under direct regulation which allows each company emits 20 tons of pollutants.