1. Consumer and producer surplus measure the? _____ benefit rather than the? ___
ID: 1159933 • Letter: 1
Question
1. Consumer and producer surplus measure the? _____ benefit rather than the? _____ benefit.
A. ?total; net
B. ?net; total
C. ?marginal; additional
D. ?subjective; objective
2. The market for corn in country A is highly competitive. At the current market price of? $5/bushel there is a shortage of? 100,000 bushels of corn in this country. Media reports claim that the price of corn will rise drastically in the near future. According to these? reports, the neighboring country B had witnessed a similar situation recently. At the same?price, the shortage in country B was also? 100,000 bushels and eventually the equilibrium price in B went up to? $10/bushel. Both countries are known to have equal number of corn producers and the market supply of corn is identical at all prices.? This, combined with the fact that consumers in the two countries also have similar tastes and?preferences, led the media to conclude that the price of corn in country A would soon be as high as? $10/bushel.??
Which of the following is being assumed by the media while concluding that the price in country A will also rise to? $10/bushel?
A. Farmers will substitute the production of other agricultural goods? (like soybeans) with corn.
B. Price of other agricultural goods will rise.
C. The supply of corn in country A will decline in the near future.
D. Demand conditions in both countries are identical.
E. There are a number of substitutes available for corn in country A.
3. Goods X and Y are perfect substitutes. When the market price of good X is? $5/unit, firm F produces 500 units of X. When the price of Y? rises, 100 consumers of Y shift to the consumption of good X. This causes industry analysts to believe that firm F has increased quantity supplied of X by 100 units to meet the higher demand for it.
To arrive at this? conclusion, the industry analysts are assuming that
A. each person will now buy more of X than they did prior to the increase in the price of Y.
B. good Y is an inferior good.
C. good X is the only substitute of Y available to them.
D. the law of supply does not hold for good Y.
E. the new buyers of good X? will, on? average, consume one unit each.
4. Sri Lanka is one of the major tea producing nations in the world. A substantial portion of the? country's annual tea production gets exported to various? countries, including the United Arab? Emirates, Russia, and other countries in the Middle East. Given the success in these? countries, Sri Lanka decided to foray into the Asian market. Research evidence indicated that people in Myanmar are major consumers of tea and that there is a high demand for tea in that country. This convinced industry experts in Sri Lanka that exporting to Myanmar was a good idea.
The above reasoning is based on the assumption that
A. tea exports to Myanmar will help the Sri Lankan producers to get an idea about how they might perform in other Asian markets.
B. Myanmar does not export tea.
C. Sri Lankan tea producers incur a higher cost of production than the tea producers in Myanmar.
D. people in Myanmar have similar tastes and preferences in tea consumption as the other consumers of Sri Lankan tea.
E. the market for tea in Myanmar is perfectly competitive.
Explanation / Answer
1) Consumer and producer surplus measures the total benefit rather than the net benefit. Option A is correct.
2) As the price of corn increased in country A after country B that means either supply decrease or demand increase. But here the supply of corn is decreased in country A in order to increase the price so that people demand less and the shortage gets nullified. Option C is correct
3) After the price of Y is increased people increase the demand of X so the supply of X has to increase in order to meet the extra demand. So each consumer now buys more X compare to the prior of price increase of Y. Option A is correct.
4) Myanmar is major consumers of tea that is the demand of tea is high. So Myanmar would like to import more tea rather than export. Option B is correct.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.