The market for lobster is shown in the diagram to the right. Assume that in 2011, 15,000 square miles of lobstering waters off the coast of Maine were closed. 1.) Using the line drawing tool, illustrate the effects of the closure. Properly label this line, 2.) Using the point drawing tool, identify the new equilibrium. Label this point 'B'. Carefully follow the instructions above and only draw the required objects. After the closure of the lobstering waters, at the original equilibrium price of $5.00 per pound, quantity supplied is quantity demanded. This is eliminated as prices Price per pound ($) Market for Lobsters O' Q 00 : 0 12 24 36 48 60 72 84 96 108 120132 Pounds of lobsters per year (millions) Your grandmother has just passed away and left you her favorite necklace. You always loved your grandmother and will miss her greatly. You want to keep the necklace as a way to remember her, and you would never sell the necklace for any amount of money. Use the Y-axis on the graph to the right to demonstrate the following: 1.) Using the line drawing tool, draw the supply curve for your grandmother's necklace. Properly label this line. 2.) Using the point drawing tool, determine the equilibrium price for the necklace. Label this point 'E". Carefully follow the instructions above and only draw the required objects. If you are not willing to sell the necklace for any amount of money, why is there an equilibrium price (particularly a price in thousands of dollars) for the necklace? (0 A. The diagram reflects the fact that quantity demanded and quantity supplied are not equal. () B. The necklace's price is determined by supply. Thus, itis a supply-determined item. () C. The equilibrium price simply reflects that, for this demand-determined item, you are the highest bidder. () D. The diagram is incorrect, because it does not adequately reveal your preferences. Price (thousands of dollars) 1 Market for Your Grandmother's Necklace Quantity o P In 1973 and 1974, the Organization of the Petroleum Exporting Countries (OPEC) imposed an embargo on shipments of crude oil to the United States. What followed was a drastic reduction in the quantity of gasoline available at local gas pumps. Congress imposed a price ceiling, or maximum price, of $0.57 per gallon of leaded regular gasoline. That price ceiling was intended to keep gasoline "affordable." 1.) Using the line drawing tool, depict the effect of the crude oil embargo such that the free-market price would rise to $1.50 per gallon. (Draw any shift in a line parallel to the original line.) Properly label this line. 2.) Using the point drawing tool, illustrate the quantity supplied at the price ceiling of $0.57 per gallon. Carefully follow the instructions above and only draw the required objects. After the price ceiling was imposed at the original equilibrium price of $0.57 per gallon, quantity demanded was quantity supplied. This Ijl would be eliminated because prices El with price rationing. Price per gallon ($) U.S. Gasoline Market 1972-1974 Q Q S1972 = P s s s e s B G Price Ceiling D1g74 Gallons per year In May 2005, a 1963 painting by Andy Warhol called Liz was sold in New York for $12.6 million. 1.) Using the line drawing tool, illustrate the supply curve that would be consistent with a price of $12.6 million. Properly label this line. 2.) Using the point drawing tool, identify the equilibrium price and quantity reflected by the intersection of the demand and supply curves you created. Label this point 'E'". Carefully follow the instructions above and only draw the required objects. Price per unit (millions of dollars) Market for Andy Warhol Painting Units o0 Suppose the U.S. government simultaneously legalized drugs and launched a highly successful antidrug advertising campaign. Use the diagram to the right to demonstrate the following: 1.) Using the line drawing tool, draw the new supply and demand curves to illustrate the effects of these changes on the price of cocaine. Label both of your curves. 2.) Using the point drawing tool, locate the new equilibrium price and quantity. Label this point 'P1". Carefully follow the instructions above and only draw the required objects. Price per kilo ($) The Drug Wars: A Matter of Supply and Demand Quantity (kilos of cocaine) The diagram to the right approximates the crude oil market in the mid-1980s in the United States. Equilibrium price was $22.67 per barrel with 9.33 million barrels consumed on a daily basis. If the world price is lower than the equilibrium price for a domestic nation (in this case, the United States), the possibility exists for foreign countries to export a product to the domestic nation. This is the case for crude oil. In this market, assume the world price of crude oil is $8 per barrel. 1.) Using the line drawing tool, determine the quantity of crude oil imports by the United States by drawing a horizontal line at the world price of $8 per barrel. Label this line Py 2.) Using the point drawing tool, determine quantity demanded at $8 per barrel. Label this point 'Pqp'. 3.) Using the point drawing tool, determine quantity supplied at $8 per barrel. Label this point 'Pqg'. Carefully follow the instructions above and only draw the required objects. The amount of imports is :l million barrels per day. Price per barrel ($) U.S. Market for Crude Qil, 1980s Q Q Sus. 2 Dus. 1 rJl 11 rrrrrrr 6 8 10 12 14 16 18 20 Millions of barrels per day If the United States is currently importing 14 million barrels per day at a world price of $4.00 per unit (the entire amount consumed), what is the effect on imports of a tax equal to $16.00 per unit? 1.) Using the line drawing tool, help determine the quantity of U.S. crude oil imports after the $16.00 per-unit tax by drawing a horizontal line at the price paid by U.S. consumers. Label this line '+ Tax'. 2.) Using the point drawing tool, determine quantity demanded at the price paid by U.S. consumers after the imposition of the import tax. Label this line IPQDI- 3.) Using the point drawing tool, determine quantity supplied at the price paid by U.S. consumers after the imposition of the import tax. Label this line 'Pqs'. Carefully follow the instructions above and only draw the required objects. The amount of imports after the $16.00 per-unit tax is | | million barrels per day. Before the tax, domestic producers supplied 0 barrels of crude oil. They now supply million barrels Ij Price per barrel ($) 5 o U.S. Market for Crude Oil, 1980s O\\ Q Sus. NN N W W D o B @ N @ - M Imports before the tax i* Dus. rrrrrovr . r . 0 rrorrIr 234567 891011121314151617181920 Millions of barrels per day o - If the United States is currently importing 14 million barrels of crude oil per day at a world price of $4.00 per unit (the entire amount consumed), how much tax revenue is generated from an import fee equal to $16.00 per unit? 1.) Using the line drawing tool, determine the quantity of U.S. crude oil imports after the $16.00 per-unit fee by drawing a horizontal line at the price paid by U.S. consumers. Label this line '+ Fee'. 2.) Using the point drawing tool, determine quantity demanded at the price paid by U.S. consumers after the imposition of the import fee. Label this line 'Pqp". 3.) Using the point drawing tool, determine quantity supplied at the price paid by U.S. consumers after the imposition of the import fee. Label this line 'Pqg'. Carefully follow the instructions above and only draw the required objects. The amount of revenue collected by the government from the $16.00 import fee is $D million per day. Price per barrel ($) U.S. Market for Crude Qil, 1980s O\\ 40 Q 36 Sus. 32 28 24 20 16 12 Imports before the tax : Dus. +rTT T 77T T T T Tt T T T T 7T 01234567 891011121314151617181920 Millions of barrels per day Suppose that the world price of oil is $20 per barrel and that the United States can buy all the oil it wants at this price. 1.) Using the line drawing tool, draw a line at the world price of $20 per barrel. Label this line 'Pyyyq4'- 2.) Using the point drawing tool, determine quantity supplied at $20 per barrel. Label this point 'P4". 3.) Using the point drawing tool, determine quantity demanded at $20 per barrel. Label this point 'P5". Carefully follow the instructions above and only draw the required objects. If domestic demand and supply are as reflected in the diagram to the right, answer the following questions: What quantity will Americans buy? D million barrels per day. How much will be supplied by U.S. firms? D million barrels per day. How much will be imported? D million barrels per day. U.S. Market for Crude Qil Price ($) 4 6 8 10 12 14 16 18 20 Millions of barrels per day @ The diagram to the right depicts a local market for hot dogs. Notice that the quantity of hot dogs sold is millions of hot dogs per month. 1.) Using the triangle drawing tool, illustrate consumer surplus. Label this area 'CS', 2.) Using the triangle drawing tool, illustrate producer surplus. Label this area 'PS'. Carefully follow the instructions above and only draw the required objects. What is the value of total surplus in this market? Total surplus is $E| million. Price per hotdog ($) 0 Market for Hot Dogs 10 20 30 40 50 60 70 80 90 100 Quantity of hot dogs per month (millions) The diagram to the right shows total surplus in a hot dog market. The blue triangle shows consumer surplus and the red triangle shows producer surplus. Using the triangle drawing tool, illustrate the amount of deadweight loss when 30 million units are bought and sold in the market. Carefully follow the instructions above and only draw the required object. Price per dozen ($) Market for Hot Dogs 0 0 10 20 30 40 50 60 70 80 90 100 Quantity of hot dogs per month (millions)