Exam_Review2

Exam_Review2 - 0 1 2 3 4 Quantity 0 i ii iii iv Price c. (2...

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Exam Review #2 – As always if you have any questions over this or other material stop by our office hours. Thanks! Suppose that our Tasmanian colleague returns to Australia after the semester, and the Australian Productivity Commission asks him to evaluate the social benefits and costs of prohibiting imports of Durian, a tropical fruit. The motivation for this prohibition is to protect native biota from disease and invasive species. He is provided with the information below . (Note that this presentation differs from than the banana example in class) 0 1 2 3 4 a. ( 2 points ) What is the market clearing quantity and price if Durian imports are allowed? (circle one answer in each row) 0 1 2 3 4 Quantity 0 i ii iii iv Price b. ( 2 points ) What is the market clearing quantity and price if Durian imports are not allowed? (circle one answer in each row)
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Unformatted text preview: 0 1 2 3 4 Quantity 0 i ii iii iv Price c. (2 points) Using the areas ‘A’ through ‘P’ identified in the graph above, what is the effect of this prohibition of imports on the net economic surplus in this market? Stated alternatively, how large would the economic gains have to be, from an economic efficiency perspective, to justify this intervention of protecting native biota via this import ban? E+F+G+H+I+J+M+N represents the difference in NES World Supply of Durian, including Australia (=marginal cost) Price $AU Australian Supply of Durian (=marginal cost) A B C D F G H I J E K Australian Demand (= marginal benefit) Quantity L M N O P iv iii ii i 0 between world supply and AU only supply. The positive effects on biota would have to be at least this large....
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This note was uploaded on 11/06/2008 for the course AEM 2500 taught by Professor Poe,g. during the Fall '07 term at Cornell.

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Exam_Review2 - 0 1 2 3 4 Quantity 0 i ii iii iv Price c. (2...

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