Exam 7: Government Actions in Markets

Wage rate (dollars per hour) Quantity demanded (workers) Quantity supplied (workers) 12 400 1000 11 600 900 10 800 800 9 1000 700 8 1200 500 -The labor demand and labor supply schedules are given in the table above. If a minimum wage of $9 per hour is imposed,

Which of the following is true regarding a price support set above the equilibrium price? I. The price support increases the price consumers pay. Ii. The price support creates a deadweight loss. Iii. The price support decreases output.

Why do suppliers pay all of a tax when supply is perfectly inelastic?

One result of a minimum wage is

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10, the tax is

-The above figure shows a labor market with minimum wage equal to $16. In this figure, what area equals the resources lost because of job search?

-The above figure shows the market for DVDs. The government decides that all citizens deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After this price ceiling is in effect, producer surplus equals ________.

When a rent ceiling below the equilibrium rent is put in place, the outcome is

The people who immediately benefit from a minimum wage are

A minimum wage that is above the equilibrium wage rate

-The figure above illustrates the current market for fast-food workers in Baltimore. a. Without any government intervention, what is the equilibrium wage rate and amount of employment? b. If the city government imposes a minimum wage of $3 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not? c. If the city government imposes a minimum wage of $6 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?

Suppose the marginal benefit the owner of a cherry orchard derives from hiring Lauren to pick cherries is $8 per hour. If the wage rate that Lauren earns is $7 per hour, then the orchard owner's surplus from Lauren's labor is ________ per hour.

-In the figure above, suppose that the government imposes a tax of $4 per pizza. Then, the

Assume a market is producing efficiently. Which type of government intervention in this market might create a deadweight loss? I. a price ceiling Ii. a price floor Iii. a price support

A sales tax imposed on sellers of a good

Who gains from a price support? Who loses? Explain how the size of the gain compares to the size of the loss.

Is the deadweight loss from a sales tax on a product larger the more inelastic the demand for the good?

In the Village of Punjab, Sheryl owns a well, which is the only source of drinking water. The supply of water is perfectly inelastic at a quantity of 1,000 gallons of water per day. At a price of $2.00 per gallon, the quantity demanded per day is 1,000 gallons. The government imposes a $0.50 per gallon tax. a. After the tax is imposed, what is the price paid by the villagers? What is the price received by Sheryl? b. How much revenue does the government collect? c. What fraction of the tax does Sheryl pay? What fraction is paid by the villagers?

The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how will the tax be divided between the buyer and seller?

People who benefit from a rent ceiling include