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Although he was a prolific artist, Pablo Picasso painted only 1,000 canvases during his "Blue Period." Picasso is now dead, and all of his Blue Period works are currently on display in museums and private galleries throughout Europe and the United States.a. Draw a supply curve for Picasso Blue Period works. Why is this supply curve different from ones you have $\operatorname{secn} ?$b. Given the supply curve from part a, the price of a Picasso Blue Period work will be entirely dependent on what factor(s)? Draw a diagram showing how the equilibrium price of such a work is determined.c. Suppose that rich art collectors decide that it is essential to acquire Picasso Blue Period art for their collections. Show the impact of this on the market for these paintings.
Use a diagram to illustrate how each of the following events affects the equilibrium price and quantity of pizza.a. The price of mozzarella cheese rises.b. The health hazards of hamburgers are widely publicized.c. The price of tomato sauce falls.d. The incomes of consumers rise and pizza is an inferior good.e. Consumers expect the price of pizza to fall next week.
After several years of decline, the market for handmade acoustic guitars is making a comeback. These guitars are usually made in small workshops employing relatively few highly skilled luthiers. Assess the impact on the equilibrium price and quantity of handmade acoustic guitars as a result of each of the following events. In your answers indicate which curve(s) shift(s) and in which direction.a. Environmentalists succeed in having the use of Brazilian rosewood banned in the United States, forcing luthiers to seek out alternative, more costly woods.b. A foreign producer reengineers the guitar-making process and floods the market with identical guitars.c. Music featuring handmade acoustic guitars makes a comeback as audiences tire of heavy metal and alternative rock music.d. The country goes into a deep recession and the income of the average American falls sharply.
A market is described by the following supply and demand curves:$$\begin{aligned}&Q^{S}=2 P\\&Q^{D}=300-P\end{aligned}$$a. Solve for the equilibrium price and quantity.b. If the government imposes a price ceiling of $\$ 90$, does a shortage or surplus (or neither) develop? What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus?c. If the government imposes a price floor of $\$ 90,$ does a shortage or surplus (or neither) develop? What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus?d. Instead of a price control, the government levies a tax on producers of $\$ 30 .$ As a result, the new supply curve is:$$Q^{s}=2(P-30)$$Does a shortage or surplus (or neither) develop? What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus?
Consider a small country that exports steel. Suppose that a "pro-trade" government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad. How does this export subsidy affect the domestic price of steel, the quantity of steel produced, the quantity of steel consumed, and the quantity of steel exported? How does it affect consumer surplus, producer surplus, government revenue, and total surplus? Is it a good policy from the standpoint of economic efficiency? (Hint: The analysis of an export subsidy is similar to the analysis of a tariff.)To find additional study resources, visit cengagebrain.com, and search for "Mankiw."
What are the implications of rapidly rising health care prices and spending for $(a)$ the growth of real-wage rates, $(b)$ government budgets, and $(c)$ offshoring of U.S. jobs? Explain.
Assume Saudi Arabia and the United States face the production possibilities for oil and cars shown in the accompanying table.a. What is the opportunity cost of producing a car in Saudi Arabia? In the United States? What is the opportunity cost of producing a barrel of oil in Saudi Arabia? In the United States?b. Which country has the comparative advantage in producing oil? In producing cars?c. Suppose that in autarky, Saudi Arabia produces 200 million barrels of oil and 3 million cars; similarly, that the United States produces 300 million barrels of oil and 2.5 million cars. Without trade, can Saudi Arabia produce more oil and more cars? Without trade, can the United States produce more oil and more cars?Suppose now that each country specializes in the good in which it has the comparative advantage, and the two countries trade. Also assume that for each country the value of imports must equal the value of exports.d. What is the total quantity of oil produced? What is the total quantity of cars produced?e. Is it possible for Saudi Arabia to consume 400 million barrels of oil and 5 million cars and for the United States to consume 400 million barrels of oil and 5 million cars?f. Suppose that, in fact, Saudi Arabia consumes 300 million barrels of oil and 4 million cars and the United States consumes 500 million barrels of oil and 6 million cars. How many barrels of oil does the United States import? How many cars does the United States export? Suppose a car costs $\$ 10,000$ on the world market. How much, then, does a barrel of oil cost on the world market?
In World Trade Organization (WTO) negotiations, if a country agrees to reduce trade barriers (tariffs or quotas), it usually refers to this as a concession to other countries. Do you think that this terminology is appropriate?
The accompanying table shows the U.S. domestic demand schedule and domestic supply schedule for oranges. Suppose that the world price of oranges is $\$ 0.30$ per orange.a. Draw the U.S. domestic supply curve and domestic demand curve.b. With free trade, how many oranges will the United States import or export?Suppose that the U.S. government imposes a tariff on oranges of $\$ 0.20$ per orange.c. How many oranges will the United States import or export after introduction of the tariff?d. In your diagram, shade the gain or loss to the economy as a whole from the introduction of this tariff.
