Market intervention：練習問題

Which of the following is an immediate effect of providing a unit subsidy to the producers of a good?

A unit tax is imposed on the producers of a good. Suppose the price elasticity of demand is \( 0.5 \) and the price elasticity of supply is \( 1.5 \). What percentage of the unit tax is borne by the consumers?

When an effective production quota is reduced (the quota limit becomes smaller), which of the following is most likely to occur in the market?

If the government provides a unit subsidy to the producers of a good with a downward-sloping demand curve and an upward-sloping supply curve, which of the following will increase?

Suppose the government imposes a unit tax on the producers of a good. In which of the following situations will the deadweight loss of the tax be zero AND the consumer surplus remain unchanged?

Regarding Market intervention, what is the immediate effect of an effective price ceiling on the quantity transacted in a market, assuming no illegal market emerges?

Suppose the price elasticity of demand for a good is perfectly elastic (\( E_d = \infty \)). If the government imposes a unit tax on the producers, explain who bears the tax burden and the impact on the price paid by consumers.

If the price elasticity of supply for a good is perfectly inelastic (\( E_s = 0 \)), explain the effect of a unit tax on the total social surplus and the deadweight loss.

Suppose the government aims to reduce the consumption of a certain good from its initial equilibrium level \( Q_0 \) to a target level \( Q_1 \). It considers two policy options: a per-unit tax on producers or an effective production quota.

(a) With the aid of a supply-demand diagram, explain why the market price paid by consumers and the deadweight loss would be identical under both policies if they successfully achieve the same target quantity \( Q_1 \). (4 marks)

(b) Now assume the price elasticity of demand for this good is perfectly inelastic (\( E_d = 0 \)). Analyze whether a per-unit tax can successfully reduce the quantity transacted to \( Q_1 \). Compare this with the effectiveness of a production quota in this specific scenario. (3 marks)

(c) Explain one reason why the government might prefer a per-unit tax over a production quota from a fiscal perspective. (1 mark)

Suppose the government decides to impose an effective production quota on the market for imported wine.

(a) With the aid of a supply-demand diagram, explain how this effective quota affects the market price, the quantity transacted, and the total social surplus. (3 marks)

(b) After the quota is implemented, it is observed that higher-quality wines constitute a larger proportion of the total wine imports. Using the law of demand and the concept of relative price, explain this phenomenon. (3 marks)

(c) Suppose the government wants to achieve the same reduction in quantity using a unit tax instead of a quota. Compare the government's fiscal position under these two policies, assuming the quota licenses are granted to existing importers free of charge. (2 marks)