Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 10CQ
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Impact of grants and loans given to the students.
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Discuss and provide two examples of how subsidies can be economically harmful.
Use two market diagrams to explain how an increase in state subsidies to public colleges might affect tuition and enrollments in both public and private colleges.
Please answer these two questions using the information from above:
The government wants to increase production of this good. Would it make more sense to offer a subsidy or a tax?
Based on your previous answers, would the government plan to increase production be likely to be effective or ineffective? Explain your answer.
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Economics: Private and Public Choice (MindTap Course List)
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- The majority of farm subsidies flow toward . a. Poor, small-scale farmers. b. Rich, large-scale farmers. c. Government employees. d. Grain wholesalers.arrow_forwardGovernments often attempt to boost the income of some agricultural producers with a variety of policies. We will discuss this in depth later in the course, but two approaches often discussed in introductory economics courses are quotas and production subsidies. Using basic supply and demand analysis, discuss how these policies work with emphasis on their similarities and differences. Does the elasticity of demand matter when comparing the policies?arrow_forwardPrice per litre ($) Quantity Demanded in 000 Quantity Supplied in 000 litres (per Month) litres (per month) 11 0 27 10 2 25 9 4 23 8 6 20 7 8 17 6 10 15 5 12 12 4 14 10 3 16 7 2 18 5 1 3 3 Given a new government policy in Microland, Gasoline producers have started to obtain subsidies from the government. Construct a NEW diagram to show the impact of the subsidy on the market equilibrium.arrow_forward
- Taxi passenger subsidy policies are in the pipeline, says MbalulaThe government wants to introduce subsidies for minibus taxi passengers, Transport Minister Fikile Mbalula has said. Speaking at the launch of the R1.1 billion Taxi Relief Fund (TRF) at the National Empowerment Fund (NEF) head office in Sandton yesterday, he said the transport policy was being reviewed and other forms of transport, such as bus transport, had already benefited from subsidies. Professor Jackie Walters, head of the Department of Transport and Supply Chain Management at the University of Johannesburg, said the issue of subsidies for the minibus taxi industry has been debated for some time, but the government had always faced the dilemma of an appropriate distribution system for such a subsidy because the taxi industry was still largely unregulated.He believed the government was probably planning to extend the taxi recapitalisation project in one way or another – this programme essentially involves exchanging…arrow_forward“Because consumers as a group must ultimately pay the total income received by farmers, it makes no real difference whether the income is paid through free farm markets or through price supports supplemented by subsidies financed out of tax revenue.” Do you agree?arrow_forwardwhy does a subsidy on a good lower the price consumers pay and raises the price producers recieve?arrow_forward
- What was the major intent of the Freedom to Farm Act of 1996? Do you agree with the intent? Why or why not? Did the law succeed in reducing overall farm subsidies? Why or why not?arrow_forwardAfter the OPEC oil embargo in the 1970s, price controls were placed on gas markets that did not allow price to rise to the market clearing level. Gas shortages resulted as did black markets. Use the analysis of price controls to discuss whether price controls likely hurt or helped consumers and the economy. Consider the following: Who is helped and harmed by price ceilings? Had gas prices been allowed to increase sharply, would we have made changes in our economy faster? At what cost? How does the elasticity of demand and supply impact the degree to which price and quantity would change in the gasoline market?arrow_forwardSubsidies: Definition Explain why governments provide subsidies. Draw a diagram to show a subsidy, and analyze the impacts of a subsidy on market outcomes. Discuss the consequences of providing a subsidy on the stakeholders in a market, including consumers, producers and the government (EVALUATE). Calculate the effects on markets and stakeholders of subsidiesarrow_forward
- Consider a free market with demand equal to QQ = 900 − 10PP and supply equal to QQ = 20PP. Now the government imposes a $15 per unit subsidy on the production of the good. What is the consumersurplus now? The producer surplus? Why is there a deadweight loss associated with the subsidy, and whatis the size of this loss?arrow_forwardplease plot a graph showing the effect of a government subsidy on the market for surgical masks.arrow_forwardWhich of the following causes for an increase in the supply of a product? a. An increase in the rate of tax b. An increase in the cost of production c. An increase in subsidy d. A decrease in the number of sellersarrow_forward
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