1.Suppose country exhibits a comparative advantage in the production of pineapple

| November 24, 2016

QUESTION 1
Suppose country exhibits a comparative advantage in the production of pineapple. Assume that there is a world price for pineapple and that the domestic market has the usual downward sloping demand curve and upward sloping supply curve. Which of the following statements is true for this country?

The country will import pineapple and producer surplus will increase relative to the no trade situation.

The country will import pineapple and consumer surplus will increase relative to the no trade situation.

The country will export pineapple and producer surplus will increase relative to the no trade situation.

The country will export pineapple and consumer surplus will increase relative to the no trade situation.

None of the above.

QUESTION 2
The demand for steel is given by the following: p=240-0.5Q. The marginal private cost of steel producers is given by the following: MPC=80+0.5*Q. Residents who live near a steel producer suffer from pollution by the firm: there is an (marginal) external cost of steel production, E=Q. The socially optimal level of steel production is:

0.

40.

80.

160.

none of the above.

QUESTION 3
The demand for steel is given by the following: p=240-0.5Q. The marginal private cost of steel producers is given by the following: MPC=80+0.5*Q. Residents who live near a steel producer suffer from pollution by the firm: there is an (marginal) external cost of steel production, E=Q. If the market for steel is competitive the deadweight loss to society is equal to:

0.

1600.

3200.

6400.

None of the above.

QUESTION 4
The demand for steel is given by the following: p=240-0.5Q. The marginal private cost of steel producers is given by the following: MPC=80+0.5*Q. Residents who live near a steel producer suffer from pollution by the firm: there is an (marginal) external cost of steel production, E=Q. A Pigouvian tax of _______ on steel production will ensure the efficient outcome is achieved.

0.

$40.

$80.

$160.

None of the above.

QUESTION 5
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:

0.

4.

5.

7.

None of the above.

QUESTION 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:

0.

4.

5.

7.

10.

QUESTION 7
New Zealand is a small open economy (a price taker) that imports solar panels, an internationally traded commodity. Suppose that it imports a large fraction of the total quantity demanded of solar panels. Suppose the demand for solar panels in New Zealand falls by 5 per cent. The domestic price of solar panels ______ and imports _______.

falls, decrease.

falls, increase.

remains unchanged, decrease.

remains unchanged, increase.

none of the above.

QUESTION 8
Which of the following statements is true?

A public good can be characterised as a good with an externality because individuals compare only the private marginal benefits and costs when deciding how much to purchase.

A public good is non rivalrous.

A public good is non excludable.

b and c are correct but a is incorrect.

a, b and c are correct.

QUESTION 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. 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 _________:

5,000; 1,000,000.

5,000; 2,000,000.

6,000; 1,000,000.

6,000; 2,000,000.

None of the above.

QUESTION 10
Which of the following statements about markets and the problem of externalities is (are) true?
Externalities generally lead to an inefficient level of consumption and or production
The inefficiency caused by an externality may be resolved by appropriately defining property rights
Taxes or subsidies may be used to correct the inefficiency caused by an externality
Even for a negative externality such as pollution, efficiency generally requires a positive level of pollution
All of the above.

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