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, which causes a shortage. Suppose that apartments are an inferior good and incomes rise. The increase in income

If the government decreases the tax on cell phones

What is the difference between a rent ceiling set below the equilibrium rent and a rent ceiling set above the equilibrium rent?

The federal minimum wage in 2010 was $7.25. If this wage rate was less than the equilibrium wage, what is the effect?

In some recent past years, prices of basic food commodities such as corn, rice, and wheat have increased sharply. Chinese authorities were concerned that escalating prices would cause inflation and be followed by civil unrest. -Suppose the Chinese government regulates the price of food and forbids firms from setting a higher price. In this case the government is setting a

-You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, as a profit-minded business person who seeks to avoid taxes whenever possible, which good would you most prefer to have taxed?

-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 $5 a firework penalty on buyers of fireworks and a $4 a firework penalty on sellers will reduce the number of fireworks bought to ________ a week and the price paid by buyers will be ________ a firework.

-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. With the quota in place, the amount of cotton produced in Georgestan is ________ because the marginal social cost of a pound of cotton is ________ the marginal social benefit of a pound of cotton.

Which of the following is NOT a potential impact of a rent ceiling set below the equilibrium rent?

How does a production quota influence farm prices and output?

-Which of the following is NOT true about the $3 per pizza tax illustrated in the above figure?

-The figure above shows the market for low-skilled labor in Midland city in a nation to the south. The government sets a minimum wage at $6 per hour. With the minimum wage law enacted, the potential loss from job search in Midland city is

-Suppose the government has declared beer to be an illegal substance and has imposed equal penalties on any person caught buying a beer and on any person caught selling a beer. Using the above figure, in which CBL is the cost of breaking the law, beer consumption is decreased by

What is a minimum wage? What are the effects of a minimum wage set below the equilibrium wage rate?

-The above figure shows the apartment market in Big City. A rent ceiling of $1100 would

A rent ceiling results in a shortage of apartments. As a result, there is

Price ceilings, such as rent ceilings, set below the equilibrium price

-In the above figure, if the minimum wage is equal to ________, there would be ________ hours of labor employed.

If supply is perfectly elastic, a sales tax imposed on sellers is paid by

-The figure above shows the market for a life-saving drug. Suppose the government imposes a $150 tax per dose on sellers of the drug. Show and describe the impact on the market. Who pays this tax?