MIME-Version: 1.0 Content-Type: multipart/related; boundary="----=_NextPart_01C7C223.C70BED40" This document is a Single File Web Page, also known as a Web Archive file. If you are seeing this message, your browser or editor doesn't support Web Archive files. Please download a browser that supports Web Archive, such as Microsoft Internet Explorer. ------=_NextPart_01C7C223.C70BED40 Content-Location: file:///C:/270B5A37/agbus-312-ps2-su07.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" Ag Bus 212

Ag Bus 312=

Problem Se= t 2

200 Points=

Due: 7/13/= 07

Dr. Hurley=

 

Directions: Please answer all items on this pro= blem set.  You must show all you= r work.  Unless otherwise stated, please si= mplify your answer.

 

= 1.      Define Welfare Economics?  (5 Points)

 

= 2.      Please explain the difference between positive and normative economics?&nbs= p; (5 Points)

 

= 3.      What are two ways of measuring willingness to pay?  Please briefly explain each.  (5 Points)

 

Figure 1: An Edgeworth-Bowley Box for Fish and Chips

 

ChipsA
 

 

= 4.      Please answer the following questions based on Figure 1 above.  Assume that Endowment 1 is the ini= tial endowment.  (30 Points)

 

a= .      = How many fish and chips are at the Endowment 1 for both consumers combined?  Please explain.  (5 Points)

 

b= .      Which endowment is the Pareto Optimal endowment?=   Please explain.  (5 Points)

 

c= .      = How much fish is Consumer A initially endowed with?  Please explain  (5 Points)

 

d= .      What is the name of the curve that the questions marks are pointing at?  (5 Points)

 

e= .      = Why is endowment 3 a Pareto Improvement over the initial endowment?  (5 Points)

 

f= .      = Are there any other Pareto Optimal endowments in the Edgeworth-Bowley box?  Please explain.  (5 Points)

 

= 5.      What is the difference between quasirent/producer surplus and profit?  (5 Points)

 

= 6.      Why is quasirent/producer surplus potentially a better measure of producer welf= are than profit?  (5 Points)

 

= 7.      What are the eight steps to graphical welfare analysis?  (5 Points)

 

= 8.      Suppose the government wants to put more research dollars into biotechnology for ri= ce production as a policy option which they expect will allow producers to pro= duce more at the same cost.  The in= itial supply curve was estimated to be P =3D 10.00 + .001Qs.  The government expects that by mak= ing this investment in research, that the supply curve will rotate out to P =3D= 10.00 + .0005Qs.  Suppose= the demand for rice is P =3D 190.00 - .0005Qd.  (65 Points)

 

a.      =        Please sketch a graph of this scenario.&nbs= p; (10 Points)

 

b.      =       What is the initial price and quantity equilibrium?=  (5 Points)

 

c.      =        What is the producer surplus at the original equilibrium?  (5 Points)

 

d.      =       What is the consumer surplus at the original equilibrium?  (5 Points)

 

e.      =        What is the new price and quantity equilibrium?  (5 Points)

 

f.      =        What is the producer surplus at the new equilibrium= ?  (5 Points)

 

g.      =       What is the consumer surplus at the new equilibrium= ?  (5 Points)

 

h.      =       What is the change in producer surplus?  (5 Points)

i.      =         What is the change in consumer surplus?  (5 Points)

 

j.      =         What is the change in total surplus?  (5 Points)

 

k.      =       Are there any winners or losers to this policy?  Please explain.  (10 Points)

 

= 9.      Suppose the government decides it wants to give a price support to almond producers= .  Currently, the supply curve for alm= onds is estimated at P =3D 2,000.00 + .02Qs.  The demand for almonds has been estimated to be 7,000.00 - .03Qd.  The government’s goal is to = make sure the almond producers receives a price of 5,000.  (75 Points)

 

a.      =        Please sketch a graph of this scenario.&nbs= p; (10 Points)

 

b.      =       What is the initial price and quantity equilibrium?=  (5 Points)

 

c.      =        What is the quantity demanded by consumers at the support price?  (5 Points)

 

d.      =       What is the quantity supplied by producers at the support price?  (5 Points)

 

e.      =        What is the producer surplus at the original equilibrium?  (5 Points)

 

f.      =        What is the consumer surplus at the original equilibrium?  (5 Points)

 

g.      =       What is the producer surplus at the price support?  (5 Points)

 

h.      =       What is the consumer surplus at the price support?  (5 Points)

 

i.      =         What is the change in producer surplus?  (5 Points)

 

j.      =         What is the change in consumer surplus?  (5 Points)

 

k.      =       How much will this price support cost the taxpayer?=  (5 Points)

 

l.      =         What is the change in total surplus taking into consideration the taxpayer cost? <= span style=3D'mso-spacerun:yes'> (5 Points)

 

m.      =     Are there any winners or losers to this policy?  Please explain.  (10 Points)

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