Suppose you work for a government agency that is considering removing certain agricultural subsidies. The removal of these subsidies will increase the price, thus lowering consumers' welfare
Because only aggregate market data is available, you are unable to measure the exact values for the compensated and equivalent variation by consumer. However, you are able to estimate the change in market consumer surplus. Assuming agricultural products are normal goods, how does your estimate of consumer surplus compare to the unknown EV and CV? Explain. Under what conditions will the three measures of welfare be close to one another?
For normal goods, the CS will be less than the CV and greater than the EV (in absolute value). Typically, these measures will be close for (1 ) small price changes, (2 ) small income effects/elasticity, and (3 ) small budget share.
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To restrict a wilderness area in the public domain to a particular group in the general public, say the motorists or snowmobilers of today, is
(a) democratic. (b) consistent with Thomas Jefferson's view on federal ownership of land. (c) undemocratic. (d) non-discriminatory.
An efficient economy
a. is a fair economy b. can only be a capitalist economy c. is not necessarily a fair economy d. would never experience air or water pollution e. would not have a government sector
Which of the following is required for a monopolist to receive positive economic profits in the long run?
a. Minimal entry barriers b. Exchange of technological know-how with rival firms c. High barriers that block new entry d. Allowing rival firms to produce close substitute products
Price differentiation is a situation in which
A) there are different prices for similar products reflecting differences in the marginal cost of providing the commodities to different groups of buyers. B) there are different prices for the same product that are not due to differences in the marginal cost of providing the commodity to different groups of buyers. C) consumers' comparison-shop. D) the demand curve is vertical.