Exam 6: Government Actions in Markets

Consider the market for purple magic markers. The demand for purple magic markers is perfectly elastic and the supply curve is upward sloping. If sellers of purple magic markers are taxed $1 per marker, how will the tax be divided between the buyer and seller?

The government imposes a sales tax on hot dogs. The tax would be paid entirely by hot dog sellers if the

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 government has declared beer to be an illegal substance and imposes a fine on anyone caught buying a beer. Selling beer, however, remains legal. Using the above figure, in which CBL is the cost of breaking the law, what is the equilibrium price and quantity with this new law in effect?

What is a black market and how does it influence the market for rental housing if a rent ceiling creates a housing shortage? What determines the level of the black market rent?

-In the above figure, the amount of tax revenue is

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

-In a diagram, illustrate the case of a price ceiling that affects the market's price and quantity.

-The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours do students work?

If the penalty on sellers of an illegal good is less than the penalty on buyers of an illegal good, then supply of the good will ________ by ________ demand and the price of the good will ________.

Suppose the government imposes a price ceiling that is lower than the equilibrium price. Discuss the effect, if any, on the price and quantity if the government later removes the price ceiling.

-In the above figure, if the minimum wage is set at $2 per hour, what quantity of labor is employed?

Which of the following leads to the demanders paying all of a tax?

-The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $3 per hour is imposed. Unemployment will equal

-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 above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. The tax decreases consumption by

-Which of the following statements is TRUE about taxes?

The incidence of sales tax is determined by the

One of the best defenses we have against malaria these days comes from a fern-like weed called wormwood. Fluctuating supply and demand have pushed the plant's price from $155 per kilo one year, to over $1000 the next. There is a push to set a price ceiling for the plant. Which of the following would NOT occur if there was a price ceiling set below the equilibrium price on wormwood?

-The table above shows the demand and supply schedules for milk in Cowland. A subsidy on milk of $1 per gallon is proposed and the government asks you to examine the effects of the subsidy. a) Draw the demand and supply curves. If there is no subsidy, what is the price of milk and how many gallons are sold? b) With the subsidy, what is the price that consumers pay? What is the price that sellers receive? How many gallons of milk are sold? c) Assuming no external costs and benefits, what is the efficient level of milk production? Explain. d) With the subsidy, what is the marginal social benefit from milk? What is the marginal social cost of milk? If the subsidy is introduced, will the level of production be efficient? Why or why not?