WTO作业(09112122-高原).docx

1. Decide whether each of the following three statements is True, False, or Uncertain, and give a brief but clear explanation why. (Note: these questions provide practice for the True, False, Uncertain section on the final exam) a. Some consumers strongly prefer Pepsi and some strongly prefer Coke. Therefore there is no single market for colas. b. Suppose that a tax on gasoline is imposed to encourage fuel efficiency. Over the following few years, the share of the tax paid by consumers will gradually fall. c. The mayor of AB city and other housing advocates are in favor of re-imposing rent controls on apartment units. (Rent control keeps apartment rents below their free-market levels) . Suppose that the supply of apartment units is completely price-inelastic. Then once rent controls are imposed, there will be no deadweight loss to society. Answer:a. This statement is false. Although some people have strong preferences for a particular brand of cola, the different brands are similar enough that they constitute one market. There are consumers who do not have strong preferences for one type of cola, and there are consumers who may have a preference, but who will also be influenced by price. Given these possibilities, the price of cola drinks will not tend to differ by very much, particularly for Coke and Pepsi.b. This statement is false. Because the gasoline is one of the natural resources and resource scarcity problems exist . The price of gasoline will be higher than before with the less inventory of gasoline.cThis statement is true. The demand of apartments will rise and consumer welfare will rise. Though producers loss their welfare, the producer surplus is less than the consumer surplus. In all, there will be no deadweight loss to society.2The market for high definition television sets (HDTVs) in China can be expressed by the following demand and supply equations: Qd = 7500 2400P, Qs = 600P, Where Q is the number of HDTVs, and the price P is in thousands of dollars. a. Calculate the equilibrium price and quantity that will prevail in a free market. b. Calculate the elasticities of demand and supply at the equilibrium. c. Calculate the consumer surplus and producer surplus at the equilibrium. d. Suppose that the U.S. government provides a subsidy of $300 per television in an effort to accelerate the adoption of HDTV. What will be the new equilibrium price paid by consumers and quantity bought? e. Is there a net welfare loss to society under the subsidy program? If not, why not? If so, what is the size of the net welfare loss? Answer:a.Qd = 7500 2400P, Qs = 600P,Qd= QsP=2.5 Price=2500dollarsQuantity=1500setsb. the elasticities of demand= -2400the elasticities of supply= 600c.Qd = 7500 2400P,Qs = 600P,P=0 Q=7500Q=0 P=3.125the producer surplus: 0.5*1500*2.5=1875the consumer surplus: 0.5*1500*(3.125-2.5)=468.75d.Price=2500-300=2200dollarsQuantity=7500-2400*(2.5-0.3)=2220setse.NO.pQs = 600P1aP0cdbQd = 7500 2400P2P1eQ1QQBefore subsidyAfter subsidyvariationConcumer surplus aa +b +c+d b +c+dProducersurplus b+ee -bTotal surplus a+b+e a+b +c+d+ec+dBecause c+d0,so there is no net welfare loss.3. At present, the price of an iPad2 in China is ￥4200, and 5 million are sold annually. Market research has shown that the demand curves are linear, and that price elasticity of market demand is 4.0 and the price elasticity of supply is +2.0. a. Calculate the demand and supply curves for iPad2 for China. b. The Chinese government proposes a ￥20 tax on every iPad sold in the country. How much revenue will the tax raise, and how will the tax affect consumer surplus and producer surplus? Answer:a.Qd=-4P+AQs=2P+BP=4200 Q=5000000A=5016800 B=4991600Qd=-4P+5016800Qs=2P+4991600b.Qd=-4P1+5016800Qs=2P2+4991600Qd= QsP1- P2=20P1=￥4206.67P2=￥4186.67Q=4999973 SETSR=￥99999460PQs=2P+4991600aP1ebP0fcP2Q d=-4P+5016800dQ0Q1QBefore taxationAfter taxationvariationConcumer surplus a+b+e a -( b+e)Producersurplus c+d+f d -(c+f)Total surplus a+b+e+ c+d+f a+d -(b+c+e+f)P0=￥4200 P1=￥4206.67 P2=￥4186.67 Q0=5000000 SETS Q1=4999973 SETSproducer surplus：c+f=(p0-p2)*Q