Exam 6: Government Actions in Markets

If the minimum wage is set above the equilibrium wage, a supply and demand diagram of the low-skilled labor market will show unemployment as

If the demand is perfectly elastic, buyers pay the entire tax.

When a government fines and/or imprisons persons convicted of using illegal drugs, the government is attempting to decrease the illegal drug trade by shifting the ________ curve for illegal drugs ________.

-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.

-To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Referring to the above figure, how much tax per unit has the government imposed?

-In the above figure, CBL is the cost of breaking the law. If it is illegal to buy and sell, then the price per unit will be

-The table above gives the demand and supply schedules for the housing market in a small town. If a rent ceiling of $200 a month is imposed, what is the quantity demanded, the quantity supplied, and the shortage of housing?

-The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $400, how many apartment units are rented?

The amount of a tax paid by the buyers will be smaller the

If a minimum wage is set above the equilibrium wage rate, employment

If policy makers believe that the equilibrium wage rate is too low, policy makers can raise wages by legislating a minimum wage, that is, a wage

-In the figure above, if the minimum wage is $2 per hour, then

If penalties are imposed only on buyers (but not on sellers) of marijuana, the equilibrium price of marijuana ________, and the equilibrium quantity of marijuana sold ________.

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

In the housing market, if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00, why will nothing change?

A rent ceiling creates a shortage. As a result, there is

Explain why a price floor set below the equilibrium price is ineffective.

-The figure above illustrates the current market for apartments in Washington, D.C. a) If the local government imposes a price ceiling of $1,500 per month, is there a shortage? If so, how much, if not, why not? b) If the local government imposes a price ceiling of $900 per month, is there a shortage? If so, how much, if not, why not?

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. What is the deadweight loss from this tax?

One reason why soda companies are so fervently against this tax might be because they assume sellers will pay the entire tax. Sellers will pay the entire tax if