The Economics of Regulation - Assignment Example

Question 4 Answer Hershey Chocolate Co Should obtains its cocoa beans when the prices are over and sell them when the prices are leading to betting high price-earnings. Question 5 Answer Price ceiling refers to the largest export cost the government imposes to prevent supplies and producers from overcharging their products in the market. When the price ceiling is at Pc, the market equilibrium is not reached, and the producers or suppliers accrue losses from the current prevailing prices. The impact of the lost gains of commerce is that producers or suppliers are discouraged from transporting their product into the market resulting in a shortage of the products in the souk.

Question 6 Answer An economic distortion is a situation when suppliers are allowed to charge their prices in the market because the government has stopped allocating its financial resources. The difference is that the landlords will not particularly benefit because the government will be controlling the prices that they are charging to tenants (Kahn, 123). Question 7 Answer Price floors are the lowest prices that products are sold in the souk. Loss of price floor policy will mean that individuals will have possession of various goods that may positively or negatively affect the state.

An example is that teenagers in society will have access to alcoholic beverages. Question 8 Answer Exporting a commodity refers to the process where a product is being transported out of the country. It is advantageous to export a product under a price floor policy because it relives exporters from paying taxes. Question 9 Answer Protectionism is a law that is placed to protect its citizen’s welfare in trade matters and jobs from foreigners and international trade by the government. An example is that the law gives a country’s citizen a higher opportunity of getting a job within the country than a foreigner (Kahn, 11).

Question 10 Answer The cost of protectionism is expensive to the countries applying the policy of protectionism. This is because they accrue economic loses in trying to protect their local businesses and jobs from foreigners (Kahn, 11). Question 11 Answer The first graph reflects the opportunity to increase economic welfare by exporting, whereas, the second one indicates the opportunity to increase economic welfare by importing. The gain on the second graph is that the economy will highly benefit when prices charged on imports are lower than the prices charged on local markets.

Conversely, in the first graph, local producers will gain when the prices for international commodities are higher than their prices. Their commodities will sell highly and benefit the economy when exported out of the country. The second graph limits local producers from selling their commodities in the market, while the first graph limits international traders from importing their products in the country.