1、PAGE a.In a free-market equilibrium, LS = LD. Solving yields w = $4 and LS = LD = 40. If the minimum wage is $5, then LS = 50 and LD = 30. The number of people employed will be given by the labor demand, so employers will hire 30 million workers. Figure 9.1.ab.Let w denote the wage received by the e

2、mployee. Then the employer receiving the $1 subsidy per worker hour only pays w-1 for each worker hour. As shown in Figure 9.1.b, the labor demand curve shifts to:LD = 80 - 10 (w-1) = 90 - 10w,where w represents the wage received by the employee.The new equilibrium will be given by the intersection

3、of the old supply curve with the new demand curve:Therefore, 90-10W* = 10W*, or W* = $4.5 per hourL* = 10(4.5) = 45 million persons employed. Figure 9.1.bFigure 9.3.aFigure 9.3.bFigure 9.5.a.iFigure 9.5.bFigure 9.6.fFigure 9.9a. We are given the equations for the total market demand for sugar in the

4、 U.S. and the supply of U.S. producers:QD = 23.86 - .25PQS = -8.19 + 1.07P.The difference between the quantity demanded and supplied, QD - QS, is the amount of sugar imported which is restricted by the quota.If the quota is increased from 3 billion pounds to 4 billion pounds, then we will have QD -

5、QS = 4 and we can solve for QS and P from:QS + 4 = 23.86 - .25 PQS = -8.19 + 1.07 PSo23.86 - .25P - 4 = -8.19 + 1.07P or P = 28.05/1.32 = 21.25 cents per poundandQS = -8.19 + (1.07)(21.25) = 14.5 billion poundsQD = QS + 4 = 18.5 billion pounds.b.Figure 9.10.bThe gain in consumer surplus is the sum o

6、f the areas A through D in Figure 9.10.b. On the other hand, domestic producers suffer a loss of producer surplus equal to area A.Numerically:A = (.75)(14.5) + (.75)(15.35-14.5)/2 = 10.88 + .32 = 11.20B = (.75)(15.35-14.5)/2 = .32C = (.75)(18.5-18.35)/2 = .06D = (.75)3 = 2.25These numbers are in bil

7、lions of cents or tens of millions of dollars.Thus, consumer surplus increases by A+B+C+D = 13.83 = $138.3 million, while domestic producer surplus decreases by A = 11.2 = $112 million.c.When the quota is 3 billion pounds, the profit earned by foreign producers are represented by the areas D and G (

8、the world price for sugar is assumed to be 12 cents per pound). When the quota increases to $4 billion, these profits are then represented by the areas E, F, and in Figure 9.10.b. The change in profits to foreign producers is thus (E+F+G) - (D+G) or E+F-D.Numerically:E +F = (21.25-12) (15.35-14.5) +

9、 (18.5-18.35) = 9.25 (in tens of millions of dollars).Thus, the profits earned by foreign producers increase by 9.25-2.25 = 7 or $70 million.The deadweight loss of the quota decreases by an amount equal to the areas B+E and C+F. Deadweight loss thus decreases by .32 + .06 + 9.25 = 9.63 or $96.3 mill

10、ion.a.At a price P=22 cents per pound, the quantity demanded QD would be 23.86 - (.25)(22) or 18.36 billion pounds. The quantity supplied by the domestic producers QS would be -5.19 + (1.07)(22) or 18.35 billion pounds which almost matches the quantity demanded. (Note: The true equilibrium price wit

11、h no imports is 22.007 cents per pound.) Use P = 22 and Q = 18.35 in the rest of the answer.Figure 9.11.ab.At the price P=22, domestic demand for sugar will be 18.4 billion pounds. If the government wants to allow 2.5 billion pounds of sugar imports, it must constrain the domestic producers to suppl

12、y no more than 18.4 - 2.5 = 15.9 billion pounds. This amounts to a quota on domestic producers of 15.9 billion pounds. The domestic supply curve will thus become vertical at this quantity (see Figure 9.11.b).Figure 9.11.bWe now compare the current case with the free market equilibrium where the pric

13、e of sugar in the U.S. is equal to the world price of 12 cents per pound. The extra cost to consumers is the loss in consumer surplus which is represented by the areas A through D. The benefit to domestic producers is the increase in producer surplus which is represented by area A. The profits of th

14、e foreign producers increase by an amount represented by area D. Finally, the deadweight loss associated with the current outcome is represented by areas B and C.Numerically:B = (15.9-7.7)*(19.7-12)/2 = 31.57C = (20.9-18.4)*(22-12)/2 = 12.5D = 2.5(22-12) = 25A = 15.9(22-12) - B = 159-31.57 = 127.43.

15、These numbers are in billions of cents or tens of millions of dollarsThe loss in consumer surplus is 127.43 + 31.57 + 12.5 + 25 = 196.5 or $1.97 billion.The gain in domestic producer surplus is 127.43 or $1.27 billion.The increase in foreign producer surplus is 25 or $250 million.The deadweight loss

16、 is 12.5 + 31.57 = 44.07 or $441 million.Figure 9.1213. If the labor market is competitive, that is, both employers and employees take the wage as given, then shifting an equal tax amount from the employee to the employer will have no effect on the amount of labor employed and on the wage kept by th

17、e employee after taxes. The equilibrium amount of labor employed is determined by the total amount of tax paid by both employees and employers. This is represented by the difference between the wage paid by the employer and the wage received by the employee. As long as the total tax doesnt change, the same amount of labor is employed and t