Exam 6: Government Actions in Markets

-The figure shows the market for rental units in Gladstone. The market is in equilibrium. The government now introduces a rent ceiling of $500 a month. The price of a rental unit ________ and the number of units rented ________.

If demand for good is very inelastic and supply for the good is very elastic a sales tax imposed on sellers will cause the price received by sellers

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

Explain the relationship between the incidence of a tax and elasticity.

The federal government pays airlines to service small cities in the United States through a subsidy program called Essential Air Service which was established in 1978 when the airline industry was deregulated. Most subsidies can't exceed $200 per passenger. Without this subsidy, what is TRUE?

-In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $3 per book. At this price, the quantity of books supplied to the market will be

Suppose the government has declared beer to be an illegal substance and imposes a fine on any person caught selling a beer. Buying 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?

-In the above figure, the price paid by the buyer before the tax is ________ per compact disc, and the price paid by the buyer after the tax is ________ per compact disc.

One consequence of rent ceilings set below the equilibrium rent is that

"The tax on insulin in the Philippines is anywhere between 10 and 20 percent. If you are rich and living in the Philippines, this is not a problem, but if you are poor, then insulin becomes something that you cannot afford." If the government places the tax on sellers, what is the most likely tax incidence?

-In the figure above, the demand curve shifts rightward from D₀ to D₁ so that D₁ is the relevant demand curve. Suppose the government imposes a rent ceiling of $500 per month. In the short run there will be

A price ________ is a regulated ________ that must be set below the equilibrium price to have an effect.

-The above figure shows the apartment rental market in Bigtown. If severe flooding resulted in the destruction of many of the city's apartment buildings, then the

-The table above gives the demand and supply schedules for bread in Bakerville. Draw the demand and supply curves. Suppose a subsidy on bread of $1 per loaf is given to bread producers. a) How will the subsidy affect the price paid by buyers for a loaf of bread and the quantity of bread sold? Show your work on your graph. b) How will the subsidy affect the amount sellers receive for a loaf of bread? c) After the subsidy is granted, what is the marginal social cost of the last loaf of bread produced? What is its marginal social benefit? If there are no external costs or external benefits, is the bread market efficient once the subsidy is granted?

How does the elasticity of demand for labor affect the deadweight loss from an increase in the minimum wage? Why?

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by

How a sales tax is divided between buyers and sellers is determined by

Making the buying and selling of a good illegal shifts the demand curve ________ and shifts the supply curve ________.

-The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $300 is imposed in the housing market, then

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