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Efficiency of market equilibrium · Part 3 of 4
9 exam-style questions with model answers, plus 10 quick multi-choice questions — every question on this part of the standard, grouped by the 3 pages of notes they come from.
Write a full answer before you reveal the model one. That comparison is where the learning happens.
Explain why the world supply curve is drawn as a horizontal line in the New Zealand price-taker model.
An illustrative New Zealand market has a domestic equilibrium of Pe = $30 and Qe = 20,000 units. The world price is $18. At $18, domestic quantity demanded is 32,000 units and domestic quantity supplied is 9,000 units.
Explain in detail what happens in this market when it opens to trade, and identify the impact on New Zealand producers.
New Zealand opens an import market to free trade at a world price below the domestic equilibrium price.
Compare and contrast the impacts on New Zealand consumers and New Zealand producers, and explain what happens to allocative efficiency. Refer to a supply and demand model in your answer.
The world price of a good New Zealand exports rises. Explain what happens to the world supply line and to New Zealand's domestic supply and demand curves.
The world price of an illustrative New Zealand import falls from $40 to $25. At $40, domestic quantity demanded was 50,000 units and domestic quantity supplied was 30,000 units. At $25, domestic quantity demanded is 68,000 units and domestic quantity supplied is 14,000 units.
Explain in detail the impact of this fall on imports and on New Zealand producers.
The world price of a major New Zealand export rises sharply.
Compare and contrast the impacts on New Zealand producers and New Zealand consumers of that good, and discuss whether New Zealand as a whole is better off. Refer to a price-taker model in your answer.
Explain what happens to imports when a tariff is imposed on an imported good, and why.
An illustrative market imports at a world price of $15. A tariff of $5 is imposed. Domestic quantity supplied rises from 10,000 to 25,000 units and domestic quantity demanded falls from 60,000 to 48,000 units.
Calculate the government's tariff revenue and both deadweight losses, and explain in detail why each deadweight loss occurs.
A tariff is imposed on an imported good to protect a New Zealand industry.
Compare and contrast the impact of the tariff on New Zealand consumers, New Zealand producers of the good, importers of the good, and the Government. Explain the impact on allocative efficiency. Refer to a price-taker model in your answer.