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5. Correcting for negative externalities - Regulation versus tradable permits
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the
area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two
methods:
Available Methods to Reduce Pollution
1.
The government sets pollution standards using regulation.
2.
The government allocates tradable pollution permits.
Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to
eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is
prohibitively expensive.
Firm
Cost of Eliminating the...
First Unit of Pollution
Second Unit of Pollution
Third Unit of Pollution
(Dollars)
(Dollars)
(Dollars)
Firm X
90
125
180
Firm Y
55
70
110
Firm Z
650
800
1,500
Now, imagine that two government employees proposed alternative plans for reducing pollution by 6 units.
Method 1: Regulation
The first government employee suggests limiting pollution through regulation. To meet the pollution goal, the government requires each firm to reduce
its pollution by 2 units.
Complete the following table with the total cost to each firm of reducing its pollution by 2 units.
Firm
Total Cost of Eliminating Two Units of Pollution
(Dollars)
Firm X
Firm Y
Firm Z
Explanation:
In order to compute the total cost of eliminating two units of pollution for each firm, add the cost of eliminating the first unit and the cost of
eliminating the second unit for each firm. The following table summarizes these calculations:
215
125
1,450
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Firm
Cost of Eliminating the...
Total Cost of Eliminating Two Units of Pollution
First Unit of Pollution
Second Unit of Pollution
(Dollars)
(Dollars)
(Dollars)
Firm X
90
125
215
Firm Y
55
70
125
Firm Z
650
800
1,450
Method 2: Tradable Permits
Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 12 units to
6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, it can emit
1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on a price.
For example, if firm X agrees to sell a permit to firm Y at an agreed-upon price, then firm Y would end up with three permits and would need to reduce
its pollution by only 1 unit while firm X would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiation
and exchange of permits are costless.
Because firm Z has high pollution-reduction costs, it thinks it might be better off buying a permit from firm Y and a permit from firm X so that it
doesn't have to reduce its own pollution emissions. At which of the following prices are both firm Y and firm X willing to sell one of their permits to firm
Z?
Check all that apply.
Explanation:
In order for a firm to be willing to sell one of its permits, the price it receives for the permit must exceed the cost of eliminating the unit of
pollution the permit represents: Each firm can use its initial allocation of two permits to avoid eliminating the third and fourth units of pollution,
which are the most costly units to eliminate. This leaves each firm, before buying or selling permits, with just having to eliminate the first two
least costly units of pollution. If a firm wants to sell one of its permits, it will then have to eliminate three units of pollution. Given that the cost
of eliminating the third unit of pollution is $110 for firm Y and $180 for firm X, both firms will be willing to sell one of their permits at any price
above $180.
Suppose the the government has set the trading price of a permit at $498 per permit.
Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it
costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the
other firms. (
Hint
: Do not include the prices paid for permits in the cost of reducing pollution.)
Firm
Initial Pollution Permit
Allocation
Action
Final Amount of Pollution
Eliminated
Cost of Pollution
Reduction
(Units of pollution)
(Units of pollution)
(Dollars)
Firm X
2
Sell one permit
$109
$149
$170
$579
$787
2
340
3
395
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Problems: Chapters 21 and 22
The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $12.50.
X
Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes
represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0
for the paper mill.
Price
(Marginal
Profitability to
the Box Mill)
($)
The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill
at various prices.
$40
$36
$32
$28
$24
$20
$16
$12
$8
$4
ECN-601 Class Resources
In the following table, fill in the marginal revenue, total…
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The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P).
Fill in the Value of Money column in the following table.
Quantity of Money Demanded
Price Level (P)
Value of Money (1/P)
(Billions of dollars)
0.80
1.5
1.00
2.0
1.33
3.5
2.00
7.0
Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the
money the
typical transaction requires, and the
money people will wish to hold in the form of currency or demand deposits.
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Homework (Ch 08)
1. Understanding the implications of taxes on welfare
The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax
equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario.
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CENGAGE MINDTAP
Critical Analysis Questions (Ch 07)
costs used to determine GDP under the resource cost-income approach.
Component
Billions of Dollars
Expenditure approach
Resource cost-income approach
Personal Consumption
12,269.1
Employee Compensation
9,655.3
Rents
656.6
Gov't Consumption & Investment
3,183.0
Imports
2,782.9
Depreciation
2,582.6
Corporate Profits
2,048.0
Interest Income
525.1
Exports
2,219.60
Gross Private Investment
3,021.1
Indirect Business Taxes
1,302.8
Self-Employment Income
1,388.5
Net Income of Foreigners
-249.00
Using the expenditure approach, GDP is S
Using the resource cost-income approach, GDP is
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Homework (Ch 08)
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Homework (Ch 08)
2. The demand curve facing a price-taking firm
Vesoro is one of more than a hundred competitive price-taking firms in San Francisco that produce extra-large cardboard boxes for moving. The
following graph shows the daily market demand and supply curves facing the extra-large cardboard box industry.
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50
45
Supply
40
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35
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20
15
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Problems: Chapters 7, 8, and 9
Suppose you have a production technology that can be characterized by a learning curve. Every time you increase production by one unit, your
marginal cost decreases by $6. There are no fixed costs, and the first unit costs you $62 to produce.
Use the given information to fill in the marginal cost of each unit, as well as the total cost and average cost of each level of output.
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Marginal Cost
Total Cost
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(Units)
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($)
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Your break-even price for two units is S
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The break-even price for those next two units alone…
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QUESTION 8
Fill in the blanks with the number adjacent to the correct word or phrase in the word bank below:
1. movement along
2. demand schedule
3. change in demand
4. negative
5. quantity demanded
6. price
7. increase
8. reduction
9. quantity
10. shift
11. demand schedule
12. demand curve
13. change in demand
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is on the vertical axis and
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The model of competitive markets relies on the following four core assumptions:
1. There must be many buyers and sellers, none of which is large in relation to total sales or purchases. In other words, a few players
can't dominate the market.
2. Each firm produces and sells a homogeneous product that is indistinguishable from all other firms' products in a given industry. That
is, buyers must regard all sellers' products as equivalent, or identical.
3. Buyers and sellers have all relevant information about prices, product quality, sources of supply, etc.
4. Firms have free entry into and exit from the industry. New firms can enter the market easily, and existing firms can exit the market
easily. There are no barriers to entry or exit.
The first three assumptions imply that all consumers and firms are price takers. The final assumption is not necessary for price-taking behavior, but
guarantees that a market remains competitive in the long run.
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Refer to Figure. A price floor of $ 8 in this market would result in
O a. the quantity of the good demanded decreases by 10 units.
O b. the quantity of the good demanded increases by 10 units.
O c. the quantity of the good demanded decreases by 30 units.
O d. the buyer's total expenditure to decrease by $20.
QUESTION 2
Price controls
O a. helps only buyers.
O b. helps only sellers.
O C. can help both buyers and sellers.
O d. helps neither buyers or sellers.
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Complete the following table by indicating whether each of the scenarios describes the concept of tying, resale price maintenance, or predatory
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Coolaire sells each refrigerator for $1,200. After Chillbox, a new firm with the same costs as
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Module One Quiz
Show what happens to the production possibilities frontier (PPF) if an epidemic reduces the population of the society.
PPF
PPF
Quantity of Industrial Output
79°F Su
Quantity of Agricultural Output
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A Homework (Ch 08)
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5. Deriving the short-run supply curve
Consider the perfectly competitive market for halogen lamps. The following graph shows the marginal cost (MC), average total cost (ATC), and
average variable cost (AVC) curves for a typical firm in the industry.
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72
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response. For questions regarding how you will be assessed, please view the Calculation Assignment Rubric, located in the Rubric Directory under
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Calculate the rate of inflation and the price index - Problem 34 (page 230 in text book)
The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1 = £940; year 2 = £970; year 3 = £1000; and year 4
= £1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to
100). Then calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate?
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Do the calculations to support your answer.
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The graph on the right shows the demand and supply curves in the market for workers in Starbucks coffee shops (called "baristas"). Assume that Starbucks
baristas are unwilling to accept a wage lower than $11 per hour, causing the wage to be fixed at that level.
20-
18-
Suppose that, due to concerns about the high number of calories in many Starbucks drinks, the demand for Starbucks products declines.
So
16-
Use a graph to explain what will happen to employment in the market for baristas?
14-
1.) Using the line drawing tool, plot either a new labor supply or labor demand curve that would result from the decline in Starbucks sales. Label your line…
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If the profit function for selling smart phone screen magnifier is -4500p2 + 561500p – 11898000, what selling price should Pineapple Store use to maximize profits?
$62.39
$264.40
$32.95
$7.37
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101
Use the following information to answer the question which immediately follows
Y = 2,000, GT-200, Cd=400 +0.9(Y-T) - 600r, 1200-80r, L-0.5Y 500, M-5000, P-7.35, n² = 0.02
What is the value of r?
Select one
a 0.58
Ob. 0.45
OC 0.62
Od 0.38
13
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(E6) Hello! Please help me answer this one. Please refer to the given picture/s below for the questions. Please read the instructions and directions very carefully. Double and triple check your answers, previous tutors got it wrong.
NOTE: Type only your answers. Please do not handwritten your answers. Make sure your formulas, solutions and answers' format are all correct.
Answer no 1 only!
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help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
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News Analysis: Border Security Tradeoffs
Adjust the following graph to illustrate the effects of implementing such measures.
Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will
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X Rb Module 01: Fundamental Econon X R Module 01: Fundamental Econon X RE Take Test: A1.05.2 Production Pos X +
https://cobbk12.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_344388_1&course_id=_34588_1&content_i... A
Suppose that the nation of Copperton produces nutmeg and cinnamon. Below are the possible combinations of nutmeg and cinnamon that Copperton can produce.
Cinnamon metric
tons (X axis)
Nutmeg metric tons
(Y axis)
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4,500
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What is the opportunity cost (amount & item) of the first 2,500 tons of cinnamon produced?
What is the opportunity cost (amount & item) of increasing production from 2,500 tons of cinnamon to 4,500 tons of cinnamon ?
What is the opportunity cost (amount & item) of increasing production from 4,500 tons of cinnamon to 6,000 tons of cinnamon ?
What is the opportunity cost…
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If the profit function for selling smart phone screen magnifier is -4500p2 + 561500p – 11898000, what is the maximum profit that can be expected from selling smart phone screen magnifiers?
Question 1 options:
$ 0, no profit
$ 5,617,681
$ 1,717,764
-$ 8,004,171
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1. Implement a 3-bit synchronous counter
with two select inputs Ctl1:0 using positive-
edge triggered T flip-flops and 4:1 muxes.
The counter operates according to the table
below:
Cth
Ctlo
Operation
Load the
value L
Keeps the
current
1
count
Counts
1
down
1
1
Counts up
Calculate the cost and critical delay for the
entire circuit. Remember that the critical
delay path for a multiplexer is 2At.
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Please help me questions attached in the picture.
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None
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I need help with this one.
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Question 9
Trenny has asked her assistant to prepare estimates of cost of two different sizes of power plants. The assistant reports that the cost of the 150 MW plant is $220,000,000, while the cost of the 270 MW plant is $400,000,000. If Trenny has a budget of only $300,000,000, estimate how large a power plant she could afford using linear interpolation (Enter your answer rounded to one decimal place and in MW eg. XX.X)?
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- vate X Student Portal | Main CENGAGE MINDTAP gage.com/static/nb/ui/evo/index.html?deploymentid=57962518850017814342930411958eISBN=9781337106603&id=1810088554&snapshotid=3502477& Problems: Chapters 21 and 22 The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $12.50. X Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. Price (Marginal Profitability to the Box Mill) ($) The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. $40 $36 $32 $28 $24 $20 $16 $12 $8 $4 ECN-601 Class Resources In the following table, fill in the marginal revenue, total…arrow_forwardThe following table shows a money demand schedule, which is the quantity of money demanded at various price levels (P). Fill in the Value of Money column in the following table. Quantity of Money Demanded Price Level (P) Value of Money (1/P) (Billions of dollars) 0.80 1.5 1.00 2.0 1.33 3.5 2.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the money the typical transaction requires, and the money people will wish to hold in the form of currency or demand deposits.arrow_forwardI’m having trouble solving these two parts to the question. How do you arrive at the answer you do? Thanks!arrow_forward
- 46956797448719&elSBN=9780357133606&id=1051825327&snapshotld%3D2183359& CENGAGE MINDTAP Q Search t Homework (Ch 08) 1. Understanding the implications of taxes on welfare The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. (? Demand Supply A. 13.00 - -- B C 9.00 D E 5.00 18 QUANTITY (Pinckneys) APR étv W PRICE (Dollars per pinckney) ----0arrow_forwardMindTap - Cengage Learning M Fwd: USE THIS ONE- ocunnin2@ x + com/static/nb/ui/evo/index.html?deploymentld%35698037222530759652689335&elSBN=9781305582033&nbld%3D15552578&snapshotld%3D15552578 CENGAGE MINDTAP Critical Analysis Questions (Ch 07) costs used to determine GDP under the resource cost-income approach. Component Billions of Dollars Expenditure approach Resource cost-income approach Personal Consumption 12,269.1 Employee Compensation 9,655.3 Rents 656.6 Gov't Consumption & Investment 3,183.0 Imports 2,782.9 Depreciation 2,582.6 Corporate Profits 2,048.0 Interest Income 525.1 Exports 2,219.60 Gross Private Investment 3,021.1 Indirect Business Taxes 1,302.8 Self-Employment Income 1,388.5 Net Income of Foreigners -249.00 Using the expenditure approach, GDP is S Using the resource cost-income approach, GDP is Grade It Now Save & Continc Continue withhout sav irch PrtSc Insert De F10 F11 F12 F5 F6 F7 F8 F9 F3 F4 & Ba 4. 5 6 8 9- Y + I/ *3arrow_forwardHomework (Ch 08) * MindTap - Cengage Learning x + m/static/nb/ui/evo/index.html?deploymentld=58830023220612202193347127562&elSBN=9781337622349&id=908491119&snapshotld%3D19375308& * CENGAGE MINDTAP Homework (Ch 08) 2. The demand curve facing a price-taking firm Vesoro is one of more than a hundred competitive price-taking firms in San Francisco that produce extra-large cardboard boxes for moving. The following graph shows the daily market demand and supply curves facing the extra-large cardboard box industry. (?) 50 45 Supply 40 Demand 35 30 25 20 15 10 0 1 2 3 4 5 6 7 89 QUANTITY OF OUTPUT (Millions of extra-large boxes) 10 19 144 ho.. DII PDI f12 DDI delete hom $. %, & * 7. 8 9. %3D backspace R PRICE (Dollars per extra-large box)arrow_forward
- Previous question continuedarrow_forwardPlease help with solvingarrow_forward* Mind Tap - Cengage Learning EIN EIN G Google Account com/static/nb/ui/evo/index.html?deploymentid%3D5796251885001781434293041195&elSBN=9781337106603&snapshotld%3D2888453&id%3D14588093798 * CENGAGE MINDTAP Problems: Chapters 7, 8, and 9 Suppose you have a production technology that can be characterized by a learning curve. Every time you increase production by one unit, your marginal cost decreases by $6. There are no fixed costs, and the first unit costs you $62 to produce. Use the given information to fill in the marginal cost of each unit, as well as the total cost and average cost of each level of output. Quantity Marginal Cost Total Cost Average Cost (Units) ($) ($) ($/unit) $62 $62 $62 24 24 $ 2$ $ 4 24 $4 2$ Suppose you receive a request for proposal (RFP) on a project for two units. Your break-even price for two units is S Suppose that if you get the contract, you estimate that you can win another project for two more units. The break-even price for those next two units alone…arrow_forward
- Сopy A pgcconline.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id%3 565711 1&course_id%3 400714 1&content_id= 143.. Remaining Time: 1 hour, 57 minutes, 20 seconds. Question Completion Status: QUESTION 8 Fill in the blanks with the number adjacent to the correct word or phrase in the word bank below: 1. movement along 2. demand schedule 3. change in demand 4. negative 5. quantity demanded 6. price 7. increase 8. reduction 9. quantity 10. shift 11. demand schedule 12. demand curve 13. change in demand 14 The of a good or service is the quantity buyers are willing and able to buy at a particular price during a particular period, all other things unchanged. A is a table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged. A is a graphical representation of a demand schedule. On a graph is on the vertical axis and is on the horizontal axis. A change in price, with no change in any of the…arrow_forwardThe model of competitive markets relies on the following four core assumptions: 1. There must be many buyers and sellers, none of which is large in relation to total sales or purchases. In other words, a few players can't dominate the market. 2. Each firm produces and sells a homogeneous product that is indistinguishable from all other firms' products in a given industry. That is, buyers must regard all sellers' products as equivalent, or identical. 3. Buyers and sellers have all relevant information about prices, product quality, sources of supply, etc. 4. Firms have free entry into and exit from the industry. New firms can enter the market easily, and existing firms can exit the market easily. There are no barriers to entry or exit. The first three assumptions imply that all consumers and firms are price takers. The final assumption is not necessary for price-taking behavior, but guarantees that a market remains competitive in the long run.arrow_forwardA https://bbhosted.cuny.edu/webapps/assessment/take/launch.jsp?course_assessment_id%3_1840433_18&icourse_id=_1973374_1&content_id=_56338622_18is Remaining Time: 33 minutes, 41 seconds. v Question Completion Status: Figure Terice 10 1s 6. 6. 10 20 30 40 50 60 70 80 quantity Refer to Figure. A price floor of $ 8 in this market would result in O a. the quantity of the good demanded decreases by 10 units. O b. the quantity of the good demanded increases by 10 units. O c. the quantity of the good demanded decreases by 30 units. O d. the buyer's total expenditure to decrease by $20. QUESTION 2 Price controls O a. helps only buyers. O b. helps only sellers. O C. can help both buyers and sellers. O d. helps neither buyers or sellers.arrow_forward
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