Exam 6: Supply, Demand and Government Policies

Using a demand-supply diagram, show how OPEC's raising of oil prices in the 1970s combined with a government-imposed price ceiling on petrol created a shortage of petrol.

A coffee-producing country requires all its growers to sell to a single, government-owned marketing board.This marketing board sells the coffee on behalf of the growers into the world market.Suppose the marketing board puts a price ceiling of $3.00 on the coffee it buys from its growers while the market equilibrium price is $5.00.What effect will this have on coffee production in this country? Quantity is given in kg.

Which of the following is NOT a mechanism of rationing used by landlords in cities with rent control?

Most of the burden of a luxury tax falls on the middle-class workers who supply luxury goods, rather than on the rich who buy them.

The world price for fuel is a price ceiling mechanism.

A binding price ceiling allows consumers to buy all the goods they demand at a lower price.

Some developing countries have used price ceilings to keep rice cheap to assist the poor.At the ceiling price:

Graph 6-7 -According to Graph 6-7, the amount of the tax that buyers would pay would be:

A tax on the sellers of coffee will cause the price the buyer pays:

Some countries use price floors for their domestic farmers to guarantee them a high return on their production.Suppose there is a price floor on wool that is binding.What will be the effect on the wool market? Identify who benefits from this policy and who bears the cost.Are there instances of this occurring in Australia's history?

Australia exports cattle to Indonesia.If Australia puts an export subsidy on cattle and the Australian supply of cattle is elastic while the demand for cattle in Indonesia is inelastic then:

Graph 6-5 -According to Graph 6-5, if the government imposes a binding price floor of $6.00 in this market, the result will be a:

Using a supply-demand diagram, show a labour market with a binding minimum wage.Now use the diagram to show those who are helped by the minimum wage and those who are hurt by the minimum wage.

Suppose a price ceiling is placed on rice.The price ceiling is set below the equilibrium price.This will result in the quantity demanded of rice exceeding the quantity supplied.

A legal minimum price at which a good can be sold is a price:

Graph 6-2 -According to Graph 6-2, if the government imposes a binding price floor in this market at a price of $8.00, the result will be a:

Price controls often help those in need.

Australia has a higher tax on luxury cars compared to other cars.Is this an effective way to raise revenue for the government from the rich?

Common rationing mechanisms under price ceilings include waiting in long lines and biases of the sellers.

If demand is less elastic than supply, then the burden of a tax will fall more heavily upon sellers of a good.