Price 16 16 Panel (b) 15 15 14 14 13 13 12 12 11 11 10 10 9 9 o 6 Supply 7 7 6 6 5 5 4 4 3 3 2 2 1 1 Demand 1 2 3 & 5 6 7 & [puonny 1 2 3 4 5 6 7 8 [ueony Refer to the figure above. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements? When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic Social Cost Private Cost 100 200 300 400 500 Q Refer to the figure above. If 325 units of plastics are produced and consumed, then the: social optimum has been reached market equilibrium has been reached government must have imposed a corrective tax to guide the market to this outcome government must have offered a corrective subsidy to guide the market to this outcome Price Supply (Private Cost) Social Value Demand (Private Value) Q3 Q4 Quantity Refer to the figure above. To internalise the externality in this market, the government should: O impose a tax on this product provide a subsidy for this product O forbid production O produce the product itselfTwo home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below. Lopes Increase the size of store and parking lot Do not increase the size of store and parking lot Increase the size of store Lopes = $1.0 million Lopes = $0.4 million and parking lot HomeMax = $1.5 million HomeMax = $3.4 million HomeMax Do not increase the size of ~ LOPS = $3.2 million Lopes = $2.0 million store and parking lot HomeMax = $0.6 million HomeMax = $2.5 million Refer to the table above. If both stores follow a dominant strategy, Lopes's annual profit will be $.04 million O $1.0 million $2.0 million $3.2 million 32 28 Social Cost 24 Private Cost 100 200 300 400 500 Q Refer to the figure above. In order to reach the social optimum, the government could: impose a tax of $2 per unit on plastics impose a tax of $6 per unit on plastics impose a tax of $8 per unit on plastics offer a subsidy of $6 per unit on plastics Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. Labor Hours Needed to Make = Quantity Produced in 36 1 Hours Parasol Plate Parasol Plate Huang 2 6 18 6 Min 2 4 18 9 Refer to the table above. At which of the following prices would both Huang and Min gain from trade with each other? 15 parasols for 6 plates 5 parasols for 10 plates 15 parasols for 3 plates Huang and Min could not both gain from trade with each other at any price