WTO作业09112122高原.docxVIP

1. Decide whether each of the following three statements is True, False, or Uncertain, and give a brief but clear explanation why. (Note: these questions provide practice for the True, False, Uncertain section on the final exam) a. Some consumers strongly prefer Pepsi and some strongly prefer Coke. Therefore there is no single market for colas. b. Suppose that a tax on gasoline is imposed to encourage fuel efficiency. Over the following few years, the share of the tax paid by consumers will gradually fall. c. The mayor of AB city and other housing advocates are in favor of re-imposing rent controls on apartment units. (Rent control keeps apartment rents below their free-market levels) . Suppose that the supply of apartment units is completely price-inelastic. Then once rent controls are imposed, there will be no deadweight loss to society. Answer:This statement is false. Although some people have strong preferences for a particular brand of cola, the different brands are similar enough that they constitute one market. There are consumers who do not have strong preferences for one type of cola, and there are consumers who may have a preference, but who will also be influenced by price. Given these possibilities,the price of cola drinks will not tend to differ by very much,particularly for Coke and Pepsi.b.This statement is false. Because the gasoline is one of the natural resources and resource scarcity problems exist . The price of gasoline will be higher than before with the less inventory of gasoline.c．This statement is true. The demand of apartments will rise and consumer welfare will rise. Though producers loss their welfare, the producer surplus is less than the consumer surplus. In all, there will be no deadweight loss to society.2．The market for high definition television sets (HDTV’s) in China can be expressed by the following demand and supply equations: Qd = 7500 – 2400P, Qs = 600P, Where Q is the number of HDTV’s, and the price P is in thousands of dollar