EBK MICROECONOMICS
2nd Edition
ISBN: 8220103679701
Author: List
Publisher: YUZU
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Chapter 10, Problem 11Q
To determine
Definition of black market, types of goods traded in it and the problems posed by it.
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Economics
The graph on the right shows the demand for and supply of labor in a market with an equilibrium wage rate of $7 per hour.
Show the impact on the graph if a minimum wage of $9 per hour is enacted.
1. Using the point drawing tool, plot the point that illustrates the quantity of labor demanded when the minimum wage is set at $9 per hour. Label your point 'A.'
2.) Using the point drawing tool, plot a point that illustrates the quantity of labor supplied when the minimum wage is set at $9 per hour. Label your point 'B.'
Carefully follow the instructions above and only draw the required objects.
3. According to the graph, when the minimum wage is set at $9 per hoer, there will be ____
unemplovment of _____ workers in this market.
A. frictional; 4 million.
B. structural; 4 million.
C. frictional; 2 million.
D. structural; 2 million.
Explain why a shortage occurs in a market where binding price ceiling exist. Does a price ceiling improve the operation of the market?
How does a price ceiling below equilibrium affect the market?
How does a price ceiling above equilibrium affect the market?
Discuss how rent control, one of the most popular price ceilings, specifically affects the market for housing.
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Similar questions
- Which of the following is NOT one of the consequences of a binding Price Ceiling? Select one: a. an illegal black market b. a shortage c. a surplus d. a decrease in the price of the good below its equilibrium pricearrow_forwardWhy do some price controls help create black markets?arrow_forwardHow are rent controls likely to affect the market for housing in a city? Create a graph illustrating the market for apartments without rent controls to help with your answer. What does it mean, in terms of this market for the rent control to be effective? Would you recommend such a policy?arrow_forward
- What is the difference between the primary market and thesecondary market?arrow_forwardWhat is the definition of a price ceiling? How can a free-market eliminate shortages?arrow_forwardThe following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes. (a). True or False: A price ceiling above $25 per box is a binding price ceiling in this market. (Hint: Economists call a price ceiling that prevents the market from reaching equilibrium a binding price ceiling.) (b). Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges. Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a _____ (options: shortage, surplus) that is _____ (options: smaller, larger) in the long run than in the short run.arrow_forward
- The figure below illustrates the market for Washington apples after the government imposes a price floor of $20 per crate of apples How many crates of apples were sold before the price floor? million crates How many crates of apples will be demanded after a binding price floor is set? million crates How many crates of apples will be supplied after a binding price floor is set? million crates How many crates of apples will be sold after the price floor? million crates What is the size of the shortage or surplus? million cratesarrow_forwardDoes a price ceiling increase or decrease the number of transactions in a market? Why? What about a price floor?arrow_forwardSuppose a binding price floor is imposed on a market. Can you show a correct craft that shows the effects of the binding price floor? The graph should indicate the shortage/surplus.arrow_forward
- Consider the market for hamburgers. Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $7 each, and employees at fast food restaurants earn $19.50 per hour. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it results in a shortage or a surplus or has no effect on the price and quantity that prevail in the market. Statement Price Control Effect The government prohibits fast food restaurants from selling hamburgers for more than $5 each. Price ceiling or price floor Shortage, surplus, or no effect Due to new regulations, fast food restaurants that would like to pay better wages in order to hire more workers are prohibited from paying more than $14.50 per hour. Price ceiling or price floor Shortage, surplus, or no effect The government has instituted a legal minimum price of $5 each for hamburgers. Price ceiling or…arrow_forwardThe equilibrium price in the housing market is very high. What do you think will happen if the government imposes a very high price ceiling that is below but very close to the equilibrium price on the housing market, because a politician owns housing units in certain areas? How does that affect the poor and the market for housing?arrow_forwardConsider rent control (a price ceiling). Who does rent control intend to benefit? Discuss some of the potential unintended consequences of rent control.arrow_forward
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