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finalreviewpart2 - if you have more that 1000 tons of this...

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More Review Problems: Final Economics 304K: Principles of Microeconomics Prof. Meg Ledyard You do not need to turn these in, but you would be well advised to go through these questions, and be able to answer them. 1. Consider the market for barbeque. Grilling meat causes pollution. The social cost of this pollution is $30 per pound of meat grilled (ignore the fact that pre-grilled meat and post grilled meat weigh different amounts. a. What would we call the pollution here? b. Show in a well-labeled graph the private cost, the social cost, the private market equilibrium, and the efficient equilibrium. Does the private market produce too much or too little barbeque? c. Suppose the government wanted to impose a tax to correct the market failure. How much should we tax the market? Does it matter whether we tax the meat producers or the meat consumers? d. Suppose the government didn’t know the social cost, but scientists know that
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Unformatted text preview: if you have more that 1000 tons of this type of pollution that it is fatal. Below that it is no problem at all. What are two solutions that the government could employ to solve the problem? Which is more efficient? 2. Consider the small land of Eatsalotoflettuce. They produce lettuce with a market price of $4 per bunch. a. Suppose that the world price of lettuce is $2. Show, on a well labeled graph, what happens to the market for lettuce in Eatsalotoflettuce when they open to the world market. Label prices, quantities, and the amounts of exports/imports. Do they import or export lettuce. b. What is consumer surplus, producer surplus, and total surplus before trade? c. What is consumer surplus, producer surplus, and total surplus after trade? d. Who gains and who loses from trade? e. Repeat the exercise assuming that the world price of lettuce is $7....
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