ECON1001 - subsidies help! (1 Viewer)

[011]

Does anyone know in domestic trade, is consumer/producer surplus reduced with a tariff in place? Or do they remain at their equilibrum amounts?

 

[Komit]

You lose a lot of Consumer surplus and gain some Producer surplus.

 

[011]

You lose a lot of Consumer surplus and gain some Producer surplus.

Oh shit sorry i meant a subsidy, as per topic title.

Is this still the same answer for that?

 

[Komit]

I've made pretty comprehensive notes on everything up to monopolies (and a bit on monopolies). How do I post them up?

 

[Sarah168]

it cant be classified at domestic trade cos tariffs affect imports. With imports, you cant say we're trading domestically (aurtarky).

producer surplus is increased as the tariff increases the the Qs.

consumer surplus is reduced as their demand is dampened by the higher price.

they would not be at eqm amount in the first place because pw<pa in order for the govt to implement the tariff in the first place


also, how come the title of the thread says "subsidies"?

 

[Sarah168]

I've made pretty comprehensive notes on everything up to monopolies (and a bit on monopolies). How do I post them up?

just click reply (not quick reply) and post it as an attachment

 

[Komit]

With an export subsidy, you lose Consumer Surplus and gain Producer surplus.

 

[Komit]

Damn, the file is too large. It is a 50 page word document.

 

[Sarah168]

errr, considering its the night b4 the exam, does anyone really want to go through 50 pages?!?! lol

 

[Komit]

I just want to distract people from doing real study, that's all.

 

[Sarah168]

you would want the people in your stream to be studying though....

 

[011]

ARGH I meant domestically, NON-international trade, production subsidies (not export subsidies).

Sorry about the confusion!

 

[Sarah168]

both surpluses are increased

 

[011]

Ahhh k, thanks.

 

[yvonne_710]

Can someone explain the lump sum tax on monopoly???

 

[Sarah168]

urgh. i guessed my way through that exam question

i just assumed the tax increases the MC and therefore affects the output of the monopoly as it charges at MC = MR (hits the MR curve at different point)

then i carried on as usual calculating the multitude of crap they asked for

argh.....enough BOS. going back to cram now

 

[Oz]

Can someone explain the lump sum tax on monopoly???

as i understand it (read have been told) when taxing monopolies the government can either tax per unit or tax a lump sum.

monopolies decide to produce at the level where MC=MR, a per unit tax would be added into the cost of production increasing MC, meaning less of the good would be produced.

assumming that the government didn't want to reduce the level of goods being produced (what the question will most likely be getting at) then the government should put in place a lump sum tax.


what this does is eat into the monopolies economic profit. they still produce at the same level because MC is unchanged, but they get less economic profit for doing so becuase they have to pay the same lump sum tax no matter how much they produce. ideally the government will levy a lump sum tax on monopolies equal to thier economic profit, making it 0 but leaving qty unchanged.


that hopfully all makes sense, if not i'm sure someone will tell me otherwise

 

[yvonne_710]

as i understand it (read have been told) when taxing monopolies the government can either tax per unit or tax a lump sum.

monopolies decide to produce at the level where MC=MR, a per unit tax would be added into the cost of production increasing MC, meaning less of the good would be produced.

assumming that the government didn't want to reduce the level of goods being produced (what the question will most likely be getting at) then the government should put in place a lump sum tax.


what this does is eat into the monopolies economic profit. they still produce at the same level because MC is unchanged, but they get less economic profit for doing so becuase they have to pay the same lump sum tax no matter how much they produce. ideally the government will levy a lump sum tax on monopolies equal to thier economic profit, making it 0 but leaving qty unchanged.


that hopfully all makes sense, if not i'm sure someone will tell me otherwise

i understand the theory now, but if the government wont put tax on MC,then put a lump sum tax, but put the lump sum tax where? like the diagram will be ??? thanks