Question

In: Economics

Malaysia is an exporter of natural rubber. Initially, the world price of natural rubber is RM5...

Malaysia is an exporter of natural rubber. Initially, the world price of natural rubber is RM5 per kilogram. It costs RM1 per kilogram (on average) to transport natural rubber from Malaysia to overseas, and Malaysian natural rubber exporters pay these transport costs. So Malaysian natural rubber producers only receive RM4 per kilogram after they pay for transport.

(a) Using a diagram, illustrate the demand and supply in the Malaysian natural rubber market. What is the domestic price of natural rubber (per kg) in Malaysia? Show the areas of consumer surplus and producer surplus that is created in Malaysia from the production and sale of natural rubber. Be sure to label your diagram carefully. [4 marks] (Hint: Malaysian natural rubber producers do not have to pay for the transportation cost if they sell their products domestically)

(b) Suppose the Malaysian government decides that it is unfair for natural rubber producers to pay for transporting natural rubber overseas. To help natural rubber producers, the government 3 decides to pay domestic natural rubber producers RM1 for every kilogram of natural rubber that they export. The government does not pay any money for natural rubber sold in Malaysia. On a new diagram, show the effect of this government policy. How does it affect the price of natural rubber in Malaysia? What are the effects on consumer surplus, producer surplus, and government revenue? Does the policy lead to a deadweight loss? If so, illustrate the loss and explain what it means. If not, explain why the policy does not lead to a deadweight loss. Be sure to fully explain your answer. [6 marks]

Solutions

Expert Solution



Related Solutions

Malaysia is an exporter of natural rubber. Initially, the world price of natural rubber is RM5...
Malaysia is an exporter of natural rubber. Initially, the world price of natural rubber is RM5 per kilogram. It costs RM1 per kilogram (on average) to transport natural rubber from Malaysia to overseas, and Malaysian natural rubber exporters pay these transport costs. So Malaysian natural rubber producers only receive RM4 per kilogram after they pay for transport. (a) Using a diagram, illustrate the demand and supply in the Malaysian natural rubber market. What is the domestic price of natural rubber...
Malaysia is an exporter of natural rubber. Initially, the world price of natural rubber is RM5...
Malaysia is an exporter of natural rubber. Initially, the world price of natural rubber is RM5 per kilogram. It costs RM1 per kilogram (on average) to transport natural rubber from Malaysia to overseas, and Malaysian natural rubber exporters pay these transport costs. So Malaysian natural rubber producers only receive RM4 per kilogram after they pay for transport. (a) Using a diagram, illustrate the demand and supply in the Malaysian natural rubber market. What is the domestic price of natural rubber...
Consider the market for a natural? resource, where the price is initially ?$12,000 per ton and...
Consider the market for a natural? resource, where the price is initially ?$12,000 per ton and 12,000 thousand tons are supplied. Suppose the price of the resource falls to ?$11,000 per? ton, at which price the market supplies 11,000 thousand tons. What is the price elasticity of supply between these? prices? Using the midpoint? formula, the price elasticity of supply is _______(Enter your response as a real number rounded to two decimal? places.)
Suppose that Malaysia is a small open economy; hence, Malaysiais unable to influence world price....
Suppose that Malaysia is a small open economy; hence, Malaysia is unable to influence world price. The supply and demand schedules for TV set are depicted in Table A.  Additionally, the equilibrium price and quantity for Malaysia's market for TV sets is $25 and 10, respectively.Table A: Supply and Demand: TV Sets (Malaysia)Price of TVSQuantity SupplyQuantity Demanded00201041620812301284016450200(a) Given this information, calculate the value of Malaysian consumer surplus and producer surplus.(b) Under free-trade conditions, assume Malaysia imports TV sets at a price...
Suppose initially Malaysia does not trade shuttlecocks. The market for shuttlecocks in Malaysia is perfectly competitive....
Suppose initially Malaysia does not trade shuttlecocks. The market for shuttlecocks in Malaysia is perfectly competitive. The domestic demand curve for shuttlecocks is downward slopping. The domestic supply curve is perfectly elastic at a price of RM3 per shuttlecock, up to a quantity of 5000 shuttlecocks. Then the domestic supply curve is perfectly inelastic at the quantity of 5000 shuttlecocks. The perfectly competitive market price for shuttlecocks in Malaysia is RM5 per unit. Note: Please use a separate diagram for...
Assume that the economy is initially at the natural level of output. A permanent increase in...
Assume that the economy is initially at the natural level of output. A permanent increase in taxes will cause which of the following? Question 7 options: a decrease in the aggregate price level, and no change in output in the medium run a reduction in unemployment in the short run a reduction in output and no change in the aggregate price level in the short run no change in investment in the medium run more than one of the above...
Goodyear Tire and Rubber Company is the ninth largest tire manufacturer in the world. Here are...
Goodyear Tire and Rubber Company is the ninth largest tire manufacturer in the world. Here are the sales revenues for the past five years: Year Revenue (millions) 1 $4,877.9 2 5,065.4 3 5,525.6 4 5,729.8 5 5,499.7 a.When might a manager prefer linear trend/double exponential smoothing techniques to moving average/simple exponential smoothing techniques and why? (5 points) b. Based on MAD for the last three years (years 3, 4, and 5), which method (linear-trend or double-exponential smoothing method with a...
A sample of cross-linked natural rubber (polyisoprene) is found to have shear modulas G = 217...
A sample of cross-linked natural rubber (polyisoprene) is found to have shear modulas G = 217 kPA at 20 C. Deduce N, the number of sub-chains between crosslinks per m^3 and hence the number average degree of polymerization between crosslinks. The chemical structure of polyisoprene. You may take for relative atomic mass C=12 and H=1, and for the density rho=909 kg/m^3. Assume <r^2>i = <r^2>o.
An economy is initially in equilibrium at the natural level. The central bank increases the money...
An economy is initially in equilibrium at the natural level. The central bank increases the money supply. Graphically illustrate and explain short-run monetary nonneutrality and long-run monetary neutrality using the AD–AS model.
Suggest different importer reactions to a price offer and how you, as an exporter, could respond...
Suggest different importer reactions to a price offer and how you, as an exporter, could respond to them.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT