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Price Ceiling P A B E C F Q D S D Qd P1 P QQs P0
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Welfare Computation Before CeilingAfter Ceiling Consumers’ surplus A+B+CA Social GainA+B+C+D+E+FA+F Deadweight Loss _B+C+D+E Producers’ surplus D+E+FF
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A Hurricane and the Price of Gas P Q D S Q2 P1 P0+ cost in time Q0 P0 S’ Q1
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A Hurricane and the Price of Gas P Q D S P1=P0+cost in time Q0 P0 S’ Q1
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Cost of Robbery $ per robbery Quantity (robberies) Social Marginal Cost R$ B A Q Robber’s surplus B Loss to Victim A+B Social Loss A
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Water-Diamond Paradox Value Vs Price Q Q P P Pd Pw
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Effect of Trade on Welfare Should the government impose restrictions to commerce (imports and/or exports)? Who would win and who would lose? Would the gains exceed the looses?
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Opening the economy in an exporting country P QQdQs PW P Q Consumer’s Surplus D Producer’s Surplus S Exports Consumers’s are worse off Producer’s are better off Social Gain is positive Small Country Assumption
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Opening the economy in an importing country P QQdQs PW P Q Consumer’s Surplus D Producer’s Surplus S Imports Consumers’s are better off Producer’s are worse off Social Gain is positive
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Tariff on imported cameras when there exists a domestic industry Small Country Assumption P A B ECF Q D S D P0+$500 QoQ1 P0 G Q’oQ’1 Producer’s Surplus GG+C Consumers’s Surplus A+B+C +D+E+ F A+B Revenue-E Deadweight Loss -D+F
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Import Quota (limit on quantity of imports) P A B ECG Q D Domestic Supply D Price after quota QoQ1 World price H Q’oQ’1 Domestic Supply +Imports F quota Producer’s Surplus HH+C Consumers’s Surplus A+ B+ C+ D+ E+ F+ G A+B License Holder Surplus -E+F Deadweight Loss -D+G quota
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Effect of Trade on Welfare Should the government impose restrictions to commerce (imports and/or exports)? Who would win and who would lose? Would the gains exceed the looses?
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Tariff on Imported Cameras Small Country Assumption-no domestic industry P A B C Q D P0+$500 Qo P0 Q1 S’ S Consumers’s SurplusA+B+CA Revenue-B Social GainA+B+CA+B
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Tariff on Imported Cameras Big Country-no domestic industry P A B E C F Q D S D P1 QoQ1 P0 S’ Consumers’ s Surplus A+B+C+DA Revenue-B+ C+ E+F Social GainA+B+C+DA+B +C+ E+F E+F D International Supply
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