Question

In: Economics

Use the following information on the supply and demand for oil in the hypothetical country Olympus...

Use the following information on the supply and demand for oil in the hypothetical country Olympus to answer the questions below. Assume that the demand and supply curves are linear.  

              Domestic           Domestic

Price ($)      Demand             Supply

60             460                 280

80             440                 320

100             420                 360

120             400                 400

140             380                 440

1. Assume that the world price of oil is $80 per barrel. Assume that Olympus is a small country and that Olympus imposes a $20 per barrel tariff on imported oil. Calculate the effect of the tariff on

a. The change in producer surplus

b. The change in consumer surplus

c. Government tariff revenue

d. Consumption distortion loss

Solutions

Expert Solution

The consumer surplus is the area below the demand curve and above the price line and the producer surplus is the area above the supply curve and below the price line. Below the consumer surplus with and without tariff is given below.

Consumer surplus

  .

Producer surplus

  .

Consumer surplus

.

Producer surplus

.

Government revenue

Dead weight loss.


Related Solutions

Use the following information on the supply and demand for oil in the hypothetical country Economica...
Use the following information on the supply and demand for oil in the hypothetical country Economica to answer the questions below. Assume that the demand and supply curves are linear. Questions 2a and 3 are worth 10 points. Each part of every other question is worth 5 points.               Domestic           Domestic Price ($)      Demand             Supply 60             460                 280 80             440                 320 100             420                 360 120             400                 400 140             380                 440 1. Assume that the world price of oil is $80 per...
The demand and supply functions for oil in a small isolated country are Qd = 210 − 1.5P
The demand and supply functions for oil in a small isolated country are Qd = 210 − 1.5P and Qs = −140+ 2P , where P is the price per barrel and quantities are in millions of barrels per year. a. Find the free market equilibrium for the economy. b. The Government imposes a price floor at $110 per barrel. If this price floor is implemented and the government is forced to buy the excess, i. What is the amount...
4.2. COMPARATIVE STATICS: ASPARTAME, OIL. For each of the following, use a supply and demand diagram...
4.2. COMPARATIVE STATICS: ASPARTAME, OIL. For each of the following, use a supply and demand diagram to deduce the impact of the event on the stated market. Would you expect the impact to be primarily on price or quantity? Feel free to mention issues that you don't think are captured by a traditional supply and demand analysis. (a) Event: The FDA announces that aspartame may cause cancer. Market: Saccharin. (Note: aspartame and saccharin are low-calorie sweeteners.) (b) Event: Oil price...
2. Use the following information to analyze the supply and demand for British pounds   There are...
2. Use the following information to analyze the supply and demand for British pounds   There are two types of imports, autos and everything else. Total import are just the sum of auto and non-auto imports. Assume that there are no purchases of foreign assets by either country.                     Imports-non autos    Imports-autos     Exports 1.5                   575                           325                        1,500 1.4                   650                           350                         1,400 1.3                   725                          375                         1,300 1.2                   800                          400                         1,200 1.1                   875                          425                         1,100 1                      950                          450                          1,000 .9                   1,025                        475                            900...
Supply and Demand (10 Marks) Draw a hypothetical demand and supply curves for egg cups in...
Supply and Demand Draw a hypothetical demand and supply curves for egg cups in Canada, and then graph and explain the following events and how they affect the equilibrium price and quantity of egg cups in Canada. A successful advertising campaign by egg cup producers. Technological improvements in the production of egg cups. An increase in the price of eggs a compliment in consumption. An increase in the price of bird feed the main input in egg production. An increase...
Use the information below to answer the following questions. The demand and supply curves facing a...
Use the information below to answer the following questions. The demand and supply curves facing a company producing a brand of coconut juice, orange Juice, are respectively given as follows:Qd =50-5PQs=2+3P.The company is contemplating to increase the price of the orange juice as a measure to raise more revenue to support a planned expansion programme. Questions i.What is the equilibrium price and quantity for the orange Juice? ii. What is the price elasticity of demand for the orange Juice? iii....
Use the following information to draw aggregate demand (AD) andaggregate supply (AS) curves on the...
Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph.Price LevelOutput Demanded (Aggregate Demand)Output Supplied (Aggregate Supply)8000$800100$700100Instructions: Use the tools provided 'AD' and 'AS' to plot the aggregate demand (AD) and aggregate supply (AS) curves. Plot only the endpoints of each line (plot 2 points for each line—4 points total). Both curves are drawn to be straight lines.Instructions: Enter your response as a whole number.a. What is the equilibrium price level?     $b....
Use the following demand and supply functions:
Use the following demand and supply functions:                                    Demand:                Qd= 900 - 60P                                    Supply:                  Qs= -200 + 50PIf the price is currently $11, there is asurplus of 110 units.shortage of 240 units.surplus of 350 units.shortage of 700 units.
Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph.
Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph. a. What is the equilibrium price level? b. What curve would have shifted if a new equilibrium were to occur at an output level of 450 and a price level of $450?  AD shifts to the right  AD shifts to the left  AS shifts to the right  AS shifts to the left c. What curve would have shifted if a new equilibrium were to occur at an output level...
Suppose that the demand for cigarettes in a hypothetical country is given by QD= 2,000 –...
Suppose that the demand for cigarettes in a hypothetical country is given by QD= 2,000 – 200*P, where P is the price per pack of cigarettes and QD is the number of packs demanded. The supply is given as QS=P*200. Find the equilibrium price and quantity of cigarettes assuming that the market is competitive In an effort to reduce smoking, the government levies a tax of $2 per pack. Compute the quantity of cigarettes (packs) bought after the tax, the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT