Correctly labelled demand and supply diagram

Assignment Help Microeconomics
Reference no: EM13154314

Assignment A

Choose ONE of the following assignment topics. Answer each question (1, 2, 3) separately, rather than answering the question as one single essay.

This article refers to a new book „Breaking the Sheep?s Back" by Charles Massey, a wool grower and Merino ram breeder at Cooma, in NSW.

"... the Australian Wool Corporation (AWC) and the Wool Council of Australia ... were given the power by the Labor Government in the mid-1980s to set the floor price. Mr Massy claims this floor was used to drive up prices to artificial and unsustainable levels, which eventually bought about the demise of the scheme. The crash could only be described as Australian agriculture's greatest financial disaster. The legacies of this crash in 1991 were an over- supplied wool market, which it appeared could only be corrected by shooting sheep, a floundering market, a stockpile of 4.7 million bales and an industry debt of $2.7 billion, not to mention the on-farm debt racked up by farmers and property investors who had counted on the floor price continuing into the 1990s."

Assignment parts:

1. According to this quote, the wool market had a price floor from the mid 1980s to the late 1990s. What does this mean and why did the Australian government impose this? Include a correctly labelled supply and demand diagram in your answer.

2. What is the downside to having a price floor in any market in general and in the wool market in particular?

3. Instead of imposing a price floor in the wool market, what one other option could the Australian government have chosen? Use a correctly labelled supply and demand diagram to demonstrate the price and quantity effects of this.

Assignment B

"With roughly 38,116,000 inhabitants and 383,000 km of road, 662 km of highways and 19.5 million of vehicles (383 vehicles per 1.000 inhabitants), Poland experiences 49,500 road crashes per year. Current statistics show an average of 5,582 persons killed and 63,000 persons injured year. That translates to roughly 15 persons killed per 100,000 inhabitants (11 persons killed per 100 road crashes) ... The problem is exacerbated by the relatively poor condition of Poland?s road infrastructure, insufficient protection of vulnerable road users, high rates of speeding and alcohol use, and insufficient use of protective devices."

In the above paragraph, the market for petrol is shown to contain a negative consumption externality.

(Note that buying/consuming a car has no externality; the externality arises once the car is being used.)

Refer to the above article, your textbook and other resources to answer these questions. Assignment parts:

1. What is the negative consumption externality described in this quote? Show this externality on a correctly labelled demand and supply diagram for the petrol market.

Identify the private equilibrium, price and quantity, and the social equilibrium, price and quantity.

2. With reference to your diagram, describe the tax solution to this externality. Explain how a tax will reduce the externality in the petrol market.

3. Instead of imposing a tax in the petrol market, what one other option could the Polish government choose? Use a correctly labelled supply and demand diagram to demonstrate the price and quantity effects of this option. (Note: the quote refers to issues other than petrol consumption.)

Reference no: EM13154314

Questions Cloud

Draw supply and demand graphs : Products become obsolete and are replaced by new goods, such as the typewriter. Draw supply and demand graphs and describe what results when this occurs.
How contingency be reported in the financial statements : The amount of the compensation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Shinobi Inc.?
Compute the value of the keynesian spending multiplier : Compute the value of the Keynesian spending multiplier for transfer payments. Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in unemployment compensation.
Preparing a report to present to the public health : You are preparing a report to present to the Public Health Council on the declining rates of gonorrhea in your state in both men and women over the last 10 years.
Correctly labelled demand and supply diagram : What is the negative consumption externality described in this quote? Show this externality on a correctly labelled demand and supply diagram for the petrol market.
What is the npv of project? assume a 10% annual discount : A 20-year project produces annual cash flows of $12,000 from year 1 to year 20. If the payback period is exactly 12 years, what is the NPV of this project? Assume a 10% annual discount rate.
Probability that student is a management major : A survey of 34 students at the Wall College of Business showed the following majors: What is the probability he or she is a management major?
A brand name has a 60% recognition rate : A brand name has a 60% recognition rate. Assume the owner of the brand wants to verify that rate by beginning with a small sample of 6 randomly selected consumers.
Problem on deductible clause : Holmgren's insurance policy of $9,000,000 has a deductible clause of $500,000. How should Holmgren Chemical report this information in its financial statements at December 31, 2010?

Reviews

Write a Review

Microeconomics Questions & Answers

  Income elasticity of demand for hormone

Explain and show graphically how this market would be affected if there is an increase in the number of dairy farmers that produce hormone free milk and at the same time south african consumers chose to be more healthy?

  What level of biomass generates this amount of harvest

What is the maximum amount of harvest that can be sustainably achieved in this system? What level of biomass generates this amount of harvest?

  Production-cost analysis in short and long run

Employ the information in the above table to compute th average product (AP) and marginal product (MP). At the production level of 200,000 chips, is the company's average variable cost decreasing, at a minimum or increasing?

  Question on price discrimination

Which of the following is not a condition required for the practice of price discrimination?

  Social welfare functions embody a normative conception

Social welfare functions embody a normative conception of the relative importance of equity and efficiency'. With the aid of diagrams, illustrate and explain this proposition.

  Compute the short run total product

Compute the short run total product, average product of labor and marginal product of labor for all numbers of L between 0 and 7.

  Competitive market structure in long run equilibrium

Assume that all firms in a perfectly competitive market structure are in long run equilibrium. The demand for the company product rise.

  What proportion of annual salary will be economic rent

How much will Jacob earn? What proportion of his annual salary will be economic rent? Why won't the advertising company for which Jacobs works be able to earn an economic profit?

  Five-forces industry analysis

Examine the extent of internal rivalry, entry, substitutes, buyer power, and supplier power within your industry, indicating whether each of these forces represents a high, medium, or low threat to profits.

  Ramifications of private money

Assume that a new law stated that any person could print their own money. Determine what kind of changes would come about in daily commercial transactions as a result of such a law?

  Demand-supply and the determination of market price

Calculate the market demand for strawberries and plot it on a graph. On the same graph plot the supply function using the data in column A. What are the equilibrium price and equilibrium quantity?

  Health administration question

Identify the extent of safety issues in Canadian hospital care. Describe strategies that might be put in place to improve safety?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd