Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help with these questions Part III: Agricultural Liberalization in China (50 points) Suppose the demand curve for rice in China is given by the

Please help with these questions

image text in transcribedimage text in transcribed
Part III: Agricultural Liberalization in China (50 points) Suppose the demand curve for rice in China is given by the equation Qd=100-10P, where Q is in million tons per year and P is in thousand yuan per ton of rice. The supply curve is 0520P20. Suppose further that the government arranges for the farmers to supply a total of 40 million tons of rice a year, and it pays a fixed procurement price 2,000 yuan per ton. The government then sells the rice in the urban areas for 3,000 yuan a ton. a) (6 points) What will be the consumer surplus, producer surplus and government revenue under this scheme? b) (4 points) Is the scheme efficient? If not, what is the deadweight loss? c) (4 points) 00 you expect a black market for rice to develop? If the government can stop farmers from selling rice outside the government procurement agency, but it cannot stop the urban residents from reselling rice, what do you expect the black market price to be? Under a \"household responsibility\" system intended to boost production and alleviate shortages of food, the farmers still have to supply the earlier quota to the government for the same price, but now they are free to produce more than the quota, and they can sell the surplus in a free market. The government still resells the procured quota at 3,000 yuan a ton. d) (4 points) How much will the farmers produce? What will be the free market price? e) (4 points) Is the new system economically efficient? If not, what is the deadweight loss? f) (6 points) What are the consumer surplus, producer surplus, and government revenue under the new scheme? Who wins and who loses compared to the original system? Suppose the market for rice is completely liberalized the government does not procure anything, and all rice bought and sold in a free market. g) (3 points) How much will be produced? What will be the market price? h) (3 points) Is that system economically efficient? If not, what is the deadweight loss? i) (6 points) What are the consumer surplus, producer surplus, and government revenue in the free market? Who wins and who loses compared to the original system in part (a)? j) (6 points) Suppose the fixed costs of rice farming are 5 bln yuan a year. Would farmers voluntarily produce rice under the first (command) system? Under the second (household responsibility) system? Under the third (free market) system?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Routledge To Global Political Economy Conversations And Inquiries

Authors: Ernesto Vivares

1st Edition

1351064525, 9781351064521

More Books

Students also viewed these Economics questions

Question

4. In Exercise 3, are the random variables X and Y independent?

Answered: 1 week ago

Question

2. Develop a good and lasting relationship

Answered: 1 week ago

Question

1. Avoid conflicts in the relationship

Answered: 1 week ago