a) Would you expect a black market in wristwatches to arise because of this price floor? Who would be buying and selling watches in this black market? Explain your reasoning. ) Suppose now, we have the price floor but no black market. A technological innovation causes a decrease in the cost of bag production. A consultant claim this will increase (1) Total Surplus and (2) Increase the quantity of bags bought. Do you agree? Explain your reasoning. E) Suppose again, we have the price floor but no black market. Bags are invented (they did not exist before). How does this affect the Deadweight Loss due to the price floor? Clearly state any assumptions you need to make. Explain your reasoning.
a) Would you expect a black market in wristwatches to arise because of this price floor? Who would be buying and selling watches in this black market? Explain your reasoning. ) Suppose now, we have the price floor but no black market. A technological innovation causes a decrease in the cost of bag production. A consultant claim this will increase (1) Total Surplus and (2) Increase the quantity of bags bought. Do you agree? Explain your reasoning. E) Suppose again, we have the price floor but no black market. Bags are invented (they did not exist before). How does this affect the Deadweight Loss due to the price floor? Clearly state any assumptions you need to make. Explain your reasoning.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section: Chapter Questions
Problem 3PA: Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on...
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The market for bags is perfectly competitive with the usual downward sloping market demand and
upward sloping market supply. No externalities. The market has a binding price floor.
a) Would you expect a black market in wristwatches to arise because of this price floor? Who
would be buying and selling watches in this black market? Explain your reasoning.
b) Suppose now, we have the price floor but no black market. A technological innovation causes
a decrease in the cost of bag production. A consultant claim this will increase (1) Total Surplus
and (2) Increase the quantity of bags bought. Do you agree? Explain your reasoning.
c) Suppose again, we have the price floor but no black market. Bags are invented (they did not
exist before). How does this affect the Deadweight Loss due to the price floor? Clearly state any
assumptions you need to make. Explain your reasoning.
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