Exam 6: Government Actions in Markets

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The deadweight loss is borne by

-The figure above shows the market for cotton in Georgestan. The government regulates the market with a production quota set at 8 million pounds per year. The price of cotton in Georgestan is

Outlawing the sale of a good shifts the supply curve

A price ceiling, such as a rent ceiling,

-In a supply and demand diagram, illustrate an effective price ceiling, that is, a price ceiling that changes the price and quantity. In the same diagram, also illustrate an effective price floor, that is, a price floor that changes the price and quantity.

If penalties are imposed only on the buyers of illegal drugs, the equilibrium price of illegal drugs will ________ and the equilibrium quantity will ________.

Suppose the price elasticity of demand for Mexican food is 1.23 and the price elasticity of supply is 0.47. If the government imposes a tax on Mexican food, do buyers or sellers pay most of the tax? Why?

Rather than prohibiting a good or service, the government might tax it. Imposing such a tax on a good or service ________ the equilibrium price and ________ the equilibrium quantity.

-The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. How much producer surplus is lost?

-The table above gives the supply and demand schedules for scooters. Because of increased injuries sustained by children riding scooters, Citizens Against Scooter Accidents successfully lobbies the government to impose a price floor of $80.00 on scooters. a) What is the quantity demanded and supplied after the price floor has been imposed? b) Is there any shortage or surplus at this price floor? If so, how much? c) If the price floor is raised to $110.00, what is the quantity demanded and supplied? d) At a price floor of $110.00, is there any shortage or surplus? If so, how much?

-In the table above, the market is in equilibrium. Then a minimum wage is set at $11 per hour. The number of workers who lose their jobs will be

The supply curve of low-skilled labor is upward sloping because those workers know that government will protect them with minimum wage legislation.

-The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. How much consumer surplus is lost?

-The table gives the demand and supply schedules for cookies. The government now levies a $0.30 tax on cookies. As a result, the price of a packet of cookies increases by ________ and the tax revenue collected is ________ a week.

-A sales tax is imposed on the sellers of gasoline. This tax shifts

In the 1980s, one of the most common sights in the socialist countries, such as the former Soviet Union and North Korea, were long lines for bread, sugar, and other necessities. These countries had price ceilings on these necessities. Some of the socialist nations, such as the former Soviet Union, have moved to a market economy by lifting the price ceilings, while others, such as North Korea, have retained their price ceilings. What prediction do you make about the presence (or absence) of long lines today in the former Soviet Union and North Korea? Explain your answer.

-The above figure shows the apartment market in Big City. A rent ceiling of $1400 per month would

-The table gives the demand and supply schedules for fireworks on the Island of Big Bang. In the past, because many deaths have resulted from accidents involving fireworks, the government has banned fireworks and is enforcing the ban. A $6 a firework penalty on sellers of fireworks and no penalty on buyers will reduce the number of fireworks bought to ________ a week and increase the price paid by buyers to ________ a firework.

Most economists believe that raising the minimum wage decreases the employment opportunities for low-skilled workers.

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. What is the amount of the tax?