The purpose of commodity buffer stocks is
(a) to moderate price fluctuations.
(b) to raise commodity prices.
(c) to encourage commodity substitution.
(d) to guarantee national security.
A
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Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The aggregate surplus with the tax is:
A. $7.11 million. B. $3.56 million. C. $13.50 million. D. $10.67 million.
A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. The quota on T-shirts causes domestic producers to
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