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HOOFDSTUK 9: PERFECTE COMPETITIE

Inleiding
Het samenspel van vraag en aanbod op een perfect competitieve vrije markt zorgt er niet alleen voor
dat er geen overschotten of tekorten ontstaan op een markt, maar zorgt ook voor maximale welvaart.
In realiteit is er echter zelden sprake van een perfect competitieve vrije markt, door bijvoorbeeld
overheidsingrijpen en/of marktmacht.
In dit hoofdstuk wordt het welvaartseffect bekeken van overheidsingrijpen op een perfect
competitieve markt. In de volgende hoofdstukken komt marktmacht aan bod.
De totale welvaart wordt berekend als de som van het consumentensurplus, producentensurplus en de
eventuele winsten voor de overheid of het buitenland.

Overzicht oefeningen
Opdracht 9.1 - Marktaanbod en -vraag
Opdracht 9.2 - Marktaanbod en -vraag
Opdracht 9.3 - Lang Termijn evenwicht
Opdracht 9.4 - Maximumprijs
Opdracht 9.5 - Minimumloon
Opdracht 9.6 - Uitbreiding op opdracht 9.5
Opdracht 9.7 - Hoeveelheidsbeperking
Opdracht 9.8 - Taks en subsidie
Opdracht 9.9 - Taks en subsidie
Opdracht 9.10 - Kiezen tussen alternatieven (inzicht)
Opdracht 9.11 - Internationale handel
Opdracht 9.12 - Internationale handel
Opdracht 9.13 - Internationale handel

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Opdracht 9.1

The production function of a firm on a perfect competitive market, with 20 identical firms, is given by:
qi = 2 L1/2 K1/2 and K = 1.
pL = w = $4 and pK = r = $10.
The demand consists of two groups, with following demand functions: qd1 = -20p + 400
qd2 = -10p + 500
a. Determine pe and qe.
b. Determine the profit/loss of a firm.

Opdracht 9.2

Following information is given of a competitive market:

100 identical firms  TCi = 0,25q²i + 400
200 identical consumers  p = 15 - 2qi
a. Determine the market supply.
b. Determine the market price and quantity.
c. Determine the profit of 1 firm.
d. Will the firm produce on the short run, on the long run?
e. How many firms will be on this market in the long run equilibrium?

Opdracht 9.3

Suppose you are given the following information about a particular industry:
QD = 6500 - 100P Market demand
Q = 1200P
S
Market supply
TC(q) = 722 + q²/200 Total cost function of a firm
Assume that all firms are identical, and that the market is characterized by perfect competition.
P = price per unit in $, Q = number of units.
a. Find the equilibrium price, the equilibrium quantity, the output supplied by the firm, and the
profit of each firm.
b. Would you expect to see entry into or exit from the industry in the long run? Explain. What
effect will an entry or exit have on the market equilibrium?
c. What is the lowest price at which each firm would sell its output in the long run?
Is the profit positive, negative, or zero at this price? Explain.
d. What is the lowest price at which each firm would sell its output in the short run?
Is the profit positive, negative, or zero at this price? Explain.

Opdracht 9.4

Suppose that the demand curve for wheat is Q = 100 – 10p and the supply curve is Q = 10p.
The government imposes a price ceiling of p = 3.
a. Describe + draw how the equilibrium changes.
b. Calculate the effect of this price ceiling on consumer surplus, producer surplus, and
deadweight loss.

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Opdracht 9.5

Consider the market for unskilled labour.

Suppose that the demand curve for labour is L D = -2000w + 3 900 000 and the supply curve is
LS = 1250w (L = the number of workers, w = wage per month).
The minimum wage in Belgium is on average 1500 euro per month.
a. Describe + draw how the equilibrium changes when a minimum wage is introduced.
b. Calculate the effect of this minimum wage on consumer surplus, producer surplus, and
deadweight loss.

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Opdracht 9.6

We resume the fictional market of unskilled labour. Demand and supply are still:
LD = - 2000w + 3 900 000
LS = 1250w
At the equilibrium 1 500 000 people are employed at a gross salary of € 1200 per month. In the
previous exercise we saw that in Belgium there’s a minimum wage of € 1500 and that this minimum
wage is causing unemployment for 975 000 people.

Now suppose that the government decided to pay an unemployment allowance of € 1500 to all the
people who got unemployed due to this minimum wage.

Use the graph and the table to illustrate the effects of this decision for the employees (werknemers),
employers (werkgevers) and the government. You can use letters to illustrate this. Also calculate the
dead weight loss and mark it on the graph. You need to compare the new situation to the original
situation, where there was no minimum wage.

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Opdracht 9.7

A production quota of 2 causes total welfare loss.

What about the producers? Do they also lose? In all cases?
Calculate the change in producer surplus in the following scenarios and sketch op a graph.

Scenario 1 Scenario 2
D: q = -0,2p + 6,2 D: q = -2p + 14
S: q = p - 1 S: q = p - 1

Why is there a difference between the scenarios?

Scenario 1 Scenario 2

p p

q q

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Opdracht 9.8

The market for a product has 100 identical consumers with a individual demand: q i = 70 - p.
The market supply is: q = -3000 +150p. What are the effects of a:
a. specific tax of t = 5/unit on the equilibrium, welfare and government tax revenue?
b. subsidy of s = 5/unit on the equilibrium, welfare and government subsidy cost?

Opdracht 9.9

Suppose that the demand curve for wheat is Q = 100 – 10p and that the supply curve is Q = 10p.
What are the effects of a:
a. specific tax of t = 1/unit on the equilibrium, government tax revenue, CS, PS, welfare, and DWL?
b. subsidy of s = 1/unit on the equilibrium, government subsidy cost, CS, PS, welfare, and DWL?

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Opdracht 9.10

A mayor wants to help renters in her city. She considers two policies that will benefit renters equally.
One policy is a rent control, which places a price ceiling, pmax, on rents. The other is a government-
housing subsidy of s dollars per month that lowers the amount renters pay (to p max). Who benefits and
who loses from these policies? Compare the effects of the two policies on the quantity of housing
consumed, consumer surplus, producer surplus, government expenditure, and deadweight loss.

Opdracht 9.11

Consider a vegetable fiber, traded in a competitive world market and imported into the United States
at a world price of $9 per pound. The American demand curve is given by Q D = 40 - 2p, and that the
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American supply curve is given by QS = p.
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a. If there were no restriction on trade, how many pounds of fiber would the US import?

b. If the US imposes a tariff of $3 per pound, what will be the US price and level of imports?
How much revenue will the government earn from the tariff? How large is the deadweight loss?

c. If the US has no tariff but imposes an import quota of 8 million pounds, what will be the US
domestic price? What is the cost of this quota for US consumers of the fiber? What is the gain for
US producers?

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p
SUSA
DUSA

Voor importtarief Na importtarief Δ

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p
SUSA
DUSA

Voor importquotum Na importquotum Δ

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Opdracht 9.12

The United States currently imports all of its coffee. The annual demand for coffee by U.S. consumers
is given by the demand curve Q = 250 – 10P, where Q is quantity (in millions of pounds) and P is the
market price per pound of coffee. World producers can harvest and ship coffee to U.S. distributors at a
constant marginal (= average) cost of $8 per pound. U.S. distributors can in turn distribute coffee for
a constant $2 per pound. The U.S. coffee market is competitive. Congress is considering a tariff on
coffee imports of $2 per pound.
a. If there is no tariff, how much do consumers pay for a pound of coffee? What is the quantity
demanded?
b. If the tariff is imposed, how much will consumers pay for a pound of coffee? What is the
quantity demanded?
c. Calculate the lost consumer surplus.
d. Calculate the tax revenue collected by the government.
e. Does the tariff result in a net gain or a net loss to society as a whole?

Opdracht 9.13

The domestic supply and demand curves for hula beans are as follows:
Supply: P = 50 + Q Demand: P = 200 - 2Q
where P is the price in cents per pound and Q is the quantity in millions of pounds. The U.S. is a small
producer in the world market of hula beans, where the current price (which will not be affected by
anything we do) is 60 cents per pound. Congress is considering a tariff of 40 cents per pound. Find the
domestic price of hula beans that will result if the tariff is imposed. Also, compute the dollar gain or
loss to domestic consumers, domestic producers, and government revenue from the tariff.

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Oplossingen zelfstudieopdrachten

9.1
a. pe= 25 ; qe=250 (qei=12,5)
b. profiti = 146,25

9.2
a. qs=200 p p>0
b. pe= 5, qe=1000, qi= 10
c. profiti= -375
d. SR: yes, because p> AVCi (5 > 2,5)
LR: no, because p < ACi (5 < 42,5)
e. n=0

9.3
a. p = $ 5 ; q = 6000 units ; qi = 500 units ; Πi = $ 528
b. entry
c. p = $ 3,8
d. p=$0

9.4
Original equilibrium: pe = 5 ; qe = 50
Equilibrium after price ceiling: Q = 30 ; Qd = 70 ; Excess Demand = 40
s

DWL = 40

9.5
Unemployment = 975 000 people
∆CS = -360 000 000 ; ∆PS = -126 000 000
∆W = -234 000 000 or DWL = 234 000 000

9.6
Original equilibrium: zie opdracht 9.5
Equilibrium after price ceiling: zie opdracht 9.5
De 975000 werklozen krijgen nu een vergoeding van € 1500 van de overheid. Dit is een kost
voor de overheid, maar extra winst voor de werknemers.
DWL = € 234 000 000 (ongewijzigd want de kost voor de overheid = de winst voor de werknemers)

9.7
Scenario 1: ∆PS = 25,5
Scenario 2: ∆PS = 0

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9.8
Original equilibrium: p = 40 ; q = 3000
a. Equilibrium after tax: pe = 43 ; qe = 2700
Government tax revenue = € 13 500
∆W = -750 or DWL = 750
b. Equilibrium after subsidy: pe = 37 ; qe = 3300
Government subsidy cost = € 16500
∆W = -750 or DWL = 750

9.9
a. Equilibrium after tax: pe = 5,5 ; qe = 45
∆CS = -23,75 ; ∆PS = -23,75
∆W = -2,5 or DWL = 2,5
b. Equilibrium after subsidy: pe = 4,5 ; qe = 55
∆CS = + 26,25 ; ∆PS = + 26,25
∆W = -2,5 or DWL = 2,5

9.10
Quantity of housing consumed: subsidy > price ceiling
Consumer surplus: subsidy > price ceiling
Producer surplus: subsidy > price ceiling
Government expenditure: subsidy > price ceiling
DWL: depends on the price elasticity or the price sensitivity

9.11
a. import = 16
b. PUSA = 12; import = 8; DWL = 12
c. PUSA = 12; DWL = 36

9.12
a. p = $10/pound
Qd = 150 mio pounds
b. p = $12/pound
Qd = 130 mio pounds
c. ∆CS = - $280mio
d. Tax revenue = $260 mio
e. Net loss

9.13
Domestic price after the tariff is imposed is 100 cents = $ 1,00
∆CS = - $24mio
∆PS = + $12mio
∆G = 0
DWL = - $12mio

Micro-economisch beleid en micro-economische optimalisatie 2 2022-2023