Question 1

Suppose the market for corn is given by the following equations for supply and demand: Q_S = 2p − 2 Q_D = 13 − p where Q is the quantity in millions of bushels per year and p is the price. a.Calculate the equilibrium price and quantity.Sketch the supply and demand curves on a graph indicating the equilibrium. b.If a price floor is imposed at $7 per bushel,will there be a surplus or a shortage? What is the quantity of excess supply or demand that results? Draw a graph to show this.

Accepted Answer

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Question 2

Suppose that a market has the following supply and demand equations: Demand: Q_D = 380 - 10p Supply: Q_S = 80 + 5p If the government imposes a specific tax of τ on suppliers,what will be the price buyers pay and sellers receive,quantity,and government revenue from the tax (as functions of τ).What tax level maximizes the revenue the government collects from the tax?

Accepted Answer

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Question 3

If a government-imposed price ceiling causes the observed price in a market to be below the equilibrium price,

Accepted Answer

If a price ceiling is imposed and it is below the equilibrium price, it will create excess demand because buyers will want to purchase more than the sellers are willing to supply at that lower price. This can lead to shortages, rationing or queues, or even a black market where buyers and sellers engage in illegal transactions at a higher price. The price ceiling may also discourage investment, innovation, and competition in the affected market, leading to reduced efficiency, quality, and availability of goods or services. Therefore, price ceilings should be used sparingly and only in cases where there is a clear market failure or social objective that cannot be achieved through other means.

Question 4

Municipalities that have adopted the policy of "rent control" typically set the rentals on certain apartments well below equilibrium.As a result,

Accepted Answer

Rent control often leads to a shortage of available apartments as landlords are not able to earn a fair return on their investment and may choose to convert their properties to other uses. As a result, prospective tenants have a difficult time finding available apartments. While landlords may also have a difficult time finding tenants, this is less likely to occur in areas with high demand for housing. Surplus of apartments would be unlikely as rent control creates a disincentive for developers to build new rental properties.

Question 5

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p Price elasticity of supply is constant at one.If the demand curve is changed to Q = 10 - .2p,price elasticity of demand at any given price is the same as before.Yet the incidence of a tax falling on consumers will be higher.Why?

Accepted Answer

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Question 6

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p If government imposes a $5 specific tax to be collected from sellers,what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

Accepted Answer

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Question 7

Suppose the market for grass seed is expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p Price elasticity of supply is constant at 1.If the supply curve is changed to Q = 8p,price elasticity of supply is still constant at one.Yet with the new supply curve,consumers pay a larger share of a specific tax.Why?

Accepted Answer

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Question 8

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

Accepted Answer

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Question 9

Suppose the market for grass seed can be expressed as: Demand: Q_D = 200 - 5p Supply: Q_S = 40 + 5p If the government collects a $5 specific tax from sellers,how much will the quantity demanded change from the amount demanded before the tax? What price will consumers pay after the tax? What price will sellers receive after the tax? What is the tax revenue?

Accepted Answer

The answer of Suppose the market for grass seed can...

Question 10

-The above figure shows the market for crude oil.If a consumer group convinces the government to set a maximum price of $2 per barrel,then

Accepted Answer

If the maximum price is set at $2, which is below the equilibrium price, suppliers will not be willing to sell at that price, leading to zero barrels being sold.

Question 11

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p If government imposes a 10% ad valorem tax to be collected from sellers,what is the price consumers will pay? How much tax revenue is collected?

Accepted Answer

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Question 12

Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state.

Accepted Answer

The answer of Explain why a tax increase on cigarettes...

Question 13

When "rent controls" result in a shortage of housing,landlords

Accepted Answer

When rent controls result in a shortage of housing, landlords are forced to find alternative methods to allocate housing. They may use criteria other than price, such as first-come-first-served, or may require higher qualifications from renters in order to select the most desirable tenants.

Question 14

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?

Accepted Answer

The answer of Suppose the market for potatoes can be...

Question 15

It is appropriate to use the supply-and-demand model if,in a market,

Accepted Answer

The supply-and-demand model assumes that all participants in the market are price takers with full information about the price and quality of the good (A). In addition, the model assumes that firms sell identical products (B) and that the costs of trading are low (C). Therefore, all of the above (D) is the best choice.

Question 16

The California cigarette market consists of the following supply and demand curves: Q_D = 150 - 20p Q_S = 40p where Q is the number of packs of cigarettes per year (in millions!),and p is the price per pack. a.Compute the market equilibrium price and quantity. b.Calculate the price elasticities of each curve at the equilibrium price/quantity. c.California imposes a tax on cigarettes of $0.90 per pack.Suppliers pay this tax to the government.Compute the after-tax price and quantity.How much do suppliers receive net of tax (per pack)? d.Demand for cigarettes is generally more elastic over longer periods of time as consumers have more time to kick the habit.What does this imply about the tax incidence in the long run as compared to the short run?

Accepted Answer

The answer of The California cigarette market consists of the...

Question 17

Government revenue from an excise tax of a given amount is greater when demand is relatively inelastic than when it is relatively elastic.

Accepted Answer

The tax will result in larger quantity sold the more inelastic demand is.Since the tax is on a per unit basis,the tax revenue is greater for the inelastic demand curve.

Question 18

-The above figure shows the market for crude oil.If the oil exploration firms convince the government to set a minimum price of $4 per barrel,then

Accepted Answer

The answer of 
-The above figure shows the market for...

Question 19

Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers.The interest rate is the price of a loan.Graph a binding usury law on the market for loans,and describe the effects of the law on the quantity of loans supplied and the quantity of loans demanded.

Accepted Answer

The answer of Usury laws place a ceiling on interest...

Question 20

In the labor market,if the government imposes a minimum wage that is below the equilibrium wage,then

Accepted Answer

When the government imposes a minimum wage that is below the equilibrium wage, it does not affect the wage rate or employment levels because employers are already paying a higher wage than the minimum. The minimum wage law only becomes binding if set above the equilibrium wage.

Quiz 2: Supply and Demand

If a government-imposed price ceiling causes the observed price in a market to be below the equilibrium price,

Municipalities that have adopted the policy of "rent control" typically set the rentals on certain apartments well below equilibrium.As a result,

Suppose the market for grass seed can be expressed as: Demand: QD = 100 - 2p Supply: QS = 3p If government imposes a $5 specific tax to be collected from sellers,what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

Suppose the market for grass seed can be expressed as: Demand: QD = 100 - 2p Supply: QS = 3p At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

-The above figure shows the market for crude oil.If a consumer group convinces the government to set a maximum price of $2 per barrel,then

Suppose the market for grass seed can be expressed as: Demand: QD = 100 - 2p Supply: QS = 3p If government imposes a 10% ad valorem tax to be collected from sellers,what is the price consumers will pay? How much tax revenue is collected?

Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state.

When "rent controls" result in a shortage of housing,landlords

Suppose the market for potatoes can be expressed as follows: Supply: QS = -20 + 10p Demand: QD = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?

It is appropriate to use the supply-and-demand model if,in a market,

Government revenue from an excise tax of a given amount is greater when demand is relatively inelastic than when it is relatively elastic.

-The above figure shows the market for crude oil.If the oil exploration firms convince the government to set a minimum price of $4 per barrel,then

Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers.The interest rate is the price of a loan.Graph a binding usury law on the market for loans,and describe the effects of the law on the quantity of loans supplied and the quantity of loans demanded.

In the labor market,if the government imposes a minimum wage that is below the equilibrium wage,then

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p If government imposes a $5 specific tax to be collected from sellers,what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

Suppose the market for grass seed can be expressed as: Demand: Q_D = 100 - 2p Supply: Q_S = 3p If government imposes a 10% ad valorem tax to be collected from sellers,what is the price consumers will pay? How much tax revenue is collected?

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?