Use the Following Pair of Graphs,which Illustrate the Market for Corn

question 67

Essay

Use the following pair of graphs,which illustrate the market for corn (which is used to produce corn-based ethanol)and a representative firm,to answer the following questions.

Figure 7.1
a.Assume policymakers pass a law requiring that all gas sold in the United States contain at least 10 percent corn-based ethanol.In the graphs above,illustrate the short-run effects of this law.In particular,show how the law would affect
• the short-run equilibrium in the market for corn,
• the short-run demand curve faced by the representative firm,and
• the representative firm's short-run profit-maximizing level of output.
Label the new curves and equilibrium values using a subscript 2.
b.Next,graphically illustrate how,after the initial changes you illustrated in question 7,the corn market and the representative firm would adjust back to long-run equilibrium.Label any new curves and equilibrium values using a subscript 3.After all adjustments have taken place,what has happened to the equilibrium market price,the number of firms operating in the market,and the representative firm's profits? Why?

Analyze the relationship between nominal and real GDP.

Calculate net exports and government purchases using economic data.

Recognize the key indicators of economic performance (e.g., GDP per person, inflation rate).

Distinguish between real and nominal values in economic indicators.

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Definitions:

Fundamental

Fundamental refers to serving as an essential component or basis for something, being of central importance.

Defence Mechanism

Psychological strategies brought into play by the unconscious mind to manipulate, deny, or distort reality in order to defend against feelings of anxiety and unacceptable impulses.

Displacement

A psychological defense mechanism where an individual shifts emotions from one object or idea to another, often less threatening, target.

Projection

A defense mechanism where an individual ascribes their own unwanted thoughts, feelings, or motives to another person.