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Chapter 9: Privatization (page 327)
Explain the four policies related to Privatisation.
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What are the features of privatization when being implemented on a state owend firm?
Among the tax proposals regularly considered by Congress is an additional tax on distilled liquors. The tax would not apply to beer. The price elasticity of supply of liquor is 4.0, and the price elasticity of demand is -0.2. The cross-elasticity of demand for beer with respect to the price of liquor is 0.1.
a. If the new tax is imposed, who will bear the greater burden鈥攍iquor suppliers or liquor consumers? Why?
b. Assuming that beer supply is infinitely elastic, how will the new tax affect the beer market?
In Example 9.1 (page 332), we calculated the gains and losses from price controls on natural gas and found that there was a deadweight loss of \(5.68 billion. This calculation was based on a price of oil of \)50 per barrel.
a. If the price of oil were \(60 per barrel, what would be the free-market price of gas? How large a deadweight loss would result if the maximum allowable price of natural gas were \)3.00 per thousand cubic feet?
b. What price of oil would yield a free-market price of natural gas of $3?
What is economic liberalisation?
A particular metal is traded in a highly competitive world market at a world price of \(9 per ounce.
Unlimited quantities are available for import into the United States at this price. The supply of this metal from domestic U.S. mines and mills can be represented by the equation QS = 2/3P, where QS is U.S. output in million ounces and P is the domestic price.
The demand for the metal in the United States is QD = 40 - 2P, where QD is the domestic demand in million ounces.
In recent years the U.S. industry has been protected by a tariff of \)9 per ounce. Under pressure from other foreign governments, the United States plans to reduce this tariff to zero. Threatened by this change, the U.S. industry is seeking a voluntary restraint agreement that would limit imports into the United States to 8 million ounces per year.
a. Under the $9 tariff, what was the U.S. domestic price of the metal?
b. If the United States eliminates the tariff and the voluntary restraint agreement is approved, what will be the U.S. domestic price of the metal?
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