Exam 6: Government Actions in Markets

-In the figure above, if the minimum wage is $4 per hour, then

In 1920 a constitutional amendment was passed that outlawed the production, sale, purchase, and consumption of alcoholic beverages. "Prohibition" encouraged bootlegging and black markets for whiskey, wine, and beer. The amendment was eventually repealed in 1933. In 1920, what alternative economic policy was available to the government as a means of reducing alcohol consumption nationwide?

Explain why in cities such as New York City that have rent ceiling laws, so many people who work in the city commute from outside the city.

Suppose the government has declared beer to be an illegal substance and has imposed penalties on any person caught buying a beer. Selling a beer, however, remains legal. Using the above figure, in which CBL is the cost of breaking the law, beer consumption is decreased by

A tax imposed on buyers raises the price of the good more than would the same tax if it was imposed on sellers.

-In the above figure, the deadweight loss due to the tax is

The sellers pay the entire sales tax levied on a good when demand is perfectly ________ or supply is perfectly ________.

-In the above figure, the price received by the seller before the tax is ________ per compact disc, and the price received and kept by the seller after the tax is ________ per compact disc.

When a minimum wage is set above the equilibrium wage rate, ________.

-Suppose a tax is imposed on sellers. The more inelastic the demand for the taxed item, the

Most of us are dependent on crude oil in some shape or way, whether it's to power our cars or to heat our homes in some parts of the country. More than 80 percent of the home heating oil used in the United States goes to the Northeast. It is suggested that there needs to be government regulation to make it illegal to charge a very high price for oil. This type of regulation would be a ________.

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

When a good is made illegal, which of the following definitely results in the price rising?

-The above figure shows the apartment market in Big City. What is the equilibrium rent in Big City?

The minimum wage

A minimum wage is a government-imposed price ________ that is designed to be ________ the equilibrium wage rate.

Because a subsidy raises marginal benefit, it can be used to eliminate the deadweight loss from overproduction.

-The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $8 per hour, how many hours do students work?

-The figure above shows the housing market in the city of Appleville. A rent ceiling of $650 per month is imposed. With the rent ceiling, the deadweight loss in the Appleville housing market is

-In the figure above, the demand curve shifts rightward from D₀ to D₁. There are no rent controls. In the short run, the increase in demand results in