Please clearly label which part of the question (a, b, or c) you are answering. a. What is the purpose of a price floor? b. Name a good that the government might want to impose a price floor on, and justify your answer C. Consider the statement: "A non-binding price floor would have no effect on the market. In that case, there is no point to having a price floor." Do you agree or disagree with this statement? Justify your answer.
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- The government has decided that the free-market price of cheese is too low.a. Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese andthe quantity of cheese sold. Is there a shortage or surplus of cheese?b. Producers of cheese complain that the price floor has reduced their total revenue. Is this possible? Explain.c. In response to cheese producers’ complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?The government has decided that the free-market price of cheese is too low.a. Suppose the government imposes a binding price floor in the cheese market.Draw a supply-and-demand diagram to show the effect of this policy on the price ofcheese and the quantity of cheese sold. Is there a shortage or surplus of cheese?b. Farmers complain that the price floor has reduced their total revenue. Is thispossible? Explain.c. In response to farmers’ complaints, the government agrees to purchase all thesurplus cheese at the price floor. Compared to the basic price floor, who benefits fromthis new policy? Who loses?Suppose that policymakers are considering placing a tax on either of two markets. In Market A, the tax will have a significant effect on the price consumers pay, but it will not affect equilibrium quantity very much. In Market B, the same tax will have only a small effect on the price consumers pay, but it will have a large effect on the equilibrium quantity. Other factors are held constant. In which market will the tax have a larger deadweight loss? Market A Market B The deadweight loss will be the same in both markets. There is not enough information to answer the question.
- If the government imposes a unit sales tax (i.e., $ tax per unit sold) on a product, which one, “demand or supply” will shift? Increase or decrease? Will the new tax cause “disequilibrium”? Please state clearly about the shift (leftward or rightward) and the equilibrium price and quantity change. No graph is required.Suppose that a market is described by the following supply and demand equations:Qs=2PQD=300-Pa.Solve for the equilibrium price and the equilibrium quantity.b.Solve that a tax of T is placed on buyers,so the new denad equation is QD=300-(P+T).Solve for the new equilibrium.What happens to the price receive by sellers,the price paid by buyers.and the quantity sold?c.Tax revenue is TxQ.Use your answer from part(b)to solve for tax revenue as a function of T.Graph this relationship for T between 0 and 300.d.The dead weight loss of a tax is the area of a triangle between supply and demand curves.Recalling that the area of the triangle is 1/2xbasexheight,solve for the dead weight loss as afunction of T.Graph this relationship for T between 0 and 300.e.The government now levies a tax of $200per unit on this good.Is this a good policy?Why or why not?Can you propose a better policy?USe the accompanying graph to answer these questions. b. Suppose demand is D and supply is S^0. If a price floor of $12 is imposed, what is the resulting surplus? What is the cost to the government of purchasing any and all unsold units? c. Suppose demand is D and supply is S^0 so that equilibrium price is $10. If an excise tax of $6 is imposed on this product, what happens to the equilibrium price paid by consumers? The price received by producers? The number of units sold?
- If the government imposes a $20 floor price for this good or service, would a surplus or deficit situation ensue on this market? If yes, what is the dollar value of this surplus or deficit? or If the government substitutes a $2 subsidy for the $20 floor price in b), explain how that would affect the demand and/or supply and determine the new equilibrium price and quantity.The figure below shows a market of good X. Suppose that the government levied the tax of 30 on X. Regarding the after-tax equilibrium quantity, does it matter on which side (sellers or buyers) the tax was levied? What is the quantity and the price buyers pay and the price sellers receive in the after-tax equilibrium? Quantity: Price buyers pay: Price sellers receive:The government has decided that the free market price of cheese is too low. Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese? Farmers complain that the price floor has reduced their total revenue. Is this possible? Explain. In response to farmers’ complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?
- Subsidies, unlike taxes, tend to increase the quantities of goods and/or services traded and consumers tend to pay a lower price for the good. From this perspective, the benefits for consumers are evident, while the effects for producers are not so conclusive. In this context, what would be the effect(s) that subsidies have on producers?I. Subsidies positively affect the quantity supplied, but the producer must pay the subsidy.II. Market prices increase.III. Producers increase the quantity offered, but the price they charge is the one that corresponds according to their supply function.Select one:a. II and IIIb. III onlyc. I, II and IIId. I and IIIe. I onlyThe government has decided that the free-market price of cheese is too low. Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese? Producers of cheese complain that the price floor has reduced their total revenue. Is this possible? Explain. In response to cheese producers’ complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?Unlike a nonbinding one, a binding price floor creates a mismatch between quantity supplied and quantity demanded and distorts market equilibrium”. Qualify this statement and make sure to include (what a price floor is, and a graphical example) in your analysis