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16. Cockatoos are a kind of parrot that are often caught in the Australian wild and smuggled into the U.S. for sale on Craig's List
16. Cockatoos are a kind of parrot that are often caught in the Australian wild and smuggled into the U.S. for sale on Craig's List as pets. This is illegal, but it happens anyway and the market is perfectly competitive. Suppose that the cost of capturing a cockatoo and transporting it to the U.S. is about $50 per bird. Typically, they are drugged and smuggled to the U.S. in suitcases. Half of the smuggled cockatoos die in transit. Each smuggled cockatoo (whether dead or alive) has a 20% probability of being discovered, in which case the cockatoo is confiscated and the smuggler is fined. If the fine imposed for each smuggled cockatoo is $1,000, then the equilibrium street-price of cockatoos in the U.S. will be A) $433.33 B) $500.00 C) $250.00 D) $50.00 E) $625.00 17. Authorities are considering a quantity tax of $2 per pound of ground coffee. If the tax is imposed, which of the following statements must be true regarding the equilibrium effects of the tax on consumers and producers in the market for coffee? A) Consumer surplus will go down by more than producer surplus. B) Consumer and producer surplus will decrease by the same amount. C) If supply is perfectly elastic, the decrease in consumer surplus will exactly equal the government revenue generated by the tax. D) If supply is perfectly inelastic, there will be no change in consumer surplus. E) If the demand curve is more elastic than the supply curve, then the decrease in consumer surplus will be larger than the decrease in producer surplus
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