BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

During a discussion several year; ago on building a pipeline to Alaska to carry natural gas, the U.S. Senate passed a bill stipulating mat there should be a guaranteed minimum price for the natural gas that would flow through line pipeline. The thinking behind the bill was that if private firms had a guaranteed price for their natural gas, they would be more willing to drill for gas and to pay to build the pipeline.

a. Using the demand and supply framework, predict the effects of this price floor on fine price, quantity demanded, and quantity supplied.

b. With the enactment of this price floor for natural gas, what are some of the likely unintended consequences in line market?

c. Suggest some policies other than the price floor that he government can pursue if it wishes to encourage drilling for natural gas and fur a new pipeline in Alaska.

A

To determine

The effect of price floor imposed by government on the price, quantity demanded and quantity supplied is to be determined using the framework of demand and supply.

Explanation

(a) If the price floor is set above the equilibrium prices then it could be binding. Suppose price floor is set as P-1 in the following diagram. The price P-1 is higher than equilibrium price level P. This creates excess supply of natural gas in the market or surplus in the market...

B

To determine

The possible consequences in the market due to the price floor are to be determined.

C

To determine

The policies other than price floor used to encourage the drilling of natural gas are to be determined.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Explain how absolute advantage and comparative advantage differ.

Principles of Macroeconomics (MindTap Course List)

What is commodity money? What is flat money? Which kind do we use?

Principles of Macroeconomics (MindTap Course List)

TIME VALUE OF MONEY Answer the following questions: a. Assuming a rate of 10% annually, find the FV of 1,000 af...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)