Markets and welfare | Practice Problems, Examples & Solutions

Consumers, Producers, and the Efficiency

Economics

The U.S. produces corn in abundance whereas Japan faces a shortage of corn.
a. If the U.S. starts to export corn in large quantities to Japan, what do you predict will be the effect on the price of corn in Japan?
b. Will the U.S. eventually run out of corn?
c. Do you think the Hotelling Principle applies to America's corn? Why or why not?

Markets for Factors of Production

02:52

Economics

The marginal cost of health insurance is a constant $\$ 8,000$ a year and the figure shows the marginal benefit and willingness and ability to pay curve. Suppose that the marginal social benefit of insurance exceeds the willingness and ability to pay by a constant $\$ 2,000$ per family per year.
If all health insurance is private and the market for insurance is competitive, how many families are covered, what is the premium, and what is the deadweight loss created?

Public Choices, Public Goods, and Healthcare

00:45

Economics

PS4 vs. Xbox One Battle Means Gamers Win, Sony Says Microsoft's latest move in the PlayStation 4 vs. Xbox One battle was to lower the price of Xbox One to $\$ 399-$ the same price as the PS4.
Can you think of reasons why the two consoles are different?

Oligopoly

Application: The Costs of Taxation

79 Practice Problems

04:43

Economics

Use the following data and the figure, which illustrates the market for a pesticide with no government intervention, to work.
When factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the waste is equal to the marginal private cost of producing the pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost).
If no one owns the lake and the government levies a pollution tax, what is the tax that achieves the efficient outcome?

Externalities

03:36

Economics

Use the following figure, which shows the demand for college education, to work.The marginal cost is a constant $\$ 6,000$ per student per year. The marginal external benefit from a college education is a constant $\$ 4,000$ per student per year.
If the government provides public colleges, what tuition will achieve the efficient number of students? How much will taxpayers have to pay?

Externalities

01:32

Economics

If the government provides healthcare to achieve the efficient coverage, how many families are covered and how much must taxpayers pay?

Public Choices, Public Goods, and Healthcare

Application: International Trade

77 Practice Problems

03:56

Economics

17. South Korea to Resume U.S. Beef Imports South Korea will reopen its market to most U.S. beef. South Korea banned imports of U.S. beef in 2003 amid concerns over a case of mad cow disease in the United States. The ban closed what was then the third-largest market for U.S. beef exporters.
a. Explain how South Korea's import ban on
U.S. beef affected beef producers and consumers in South Korea.
b. Draw a graph of the market for beef in South Korea to illustrate your answer to part (a). Identify the changes in consumer surplus, producer surplus, and deadweight loss.

Global Markets in Action

03:49

Economics

A semiconductor is a key component in your laptop, cellphone, and iPod. The table provides information about the market for semiconductors in the United States.
Producers of semiconductors can get $\$ 18$ a unit on the world market.
a. With no international trade, what would be the price of a semiconductor and how many semiconductors a year would be bought and sold in the United States?
b. Does the United States have a comparative advantage in producing semiconductors?

Global Markets in Action

04:47

Economics

Use the information on the U.S. wholesale market for roses in Problem 1 to work.
Draw a graph to illustrate the gains and losses from the import quota and on the graph identify the gains and losses, the importers' profit, and the deadweight loss.

Global Markets in Action