Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN: 9781285165912
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 6, Problem 1QCMC
To determine
The impact of a binding price floor in the economy.
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When the government imposes a binding price floor,it causesa. the supply curve to shift to the left.b. the demand curve to shift to the right.c. a shortage of the good to develop.d. a surplus of the good to develop
QUESTION 1
(a) With aid of production possibility frontier, explain the concepts of scarcity, choice and opportunity cost.
(b) Give an example of a price ceiling and an example of a price floor. Which causes a shortage of a good—a price ceiling or a price floor? Justify your answer with a graph.
Suppose that the government has been supporting the price of corn. It's free market price is $2.50 per bushel, but the govt. has been setting a support price of $3.50 per bushel. Which of the following are ways that the government might try to reduce the size of the corn surplus?
(One or more)
A: Decrease the suppport price
B: Institute an acreage allotment program
C: Decrease demand by taxing corn purchases
D: Raise the support price.
Chapter 6 Solutions
Principles of Macroeconomics (MindTap Course List)
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Similar questions
- All the governments in the world are using price floor for farmers because____________. a. All of these b. it gives good income to the farmers c. it ensures supply of farm products d. it makes farmers continue to produce the same farm productarrow_forwardPlease assist with sections C-E only, thank you! Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? (b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased? (c) Can you identify any government revenues? (d) Is there any inefficiency, and if so, can you define it and label it on the graph? (e) If the producer has an inelastic supply curve, which market participant has the bigger tax burden? Explain.arrow_forwardWhat determines by how much the price goes up when the government implements a price floor? Question 5 options: The government All the other answers are incorrect The elasticity of supply The elasticity of demandarrow_forward
- A market is described by the following supply and demand curves: QS=2P andQD =300-2Pa. Solve for the equilibrium price(in $) and quantity.b. Two policies have been suggested to the government i) a price floor of $90 or anii)price ceiling of $90. Which policy government can take and why?c. For the adopted policy in b) what will be the price, quantity demand, quantitysupply, shortage, and surplus?arrow_forwardMost transactions in the economy generate what sort of surplus? a. consumer and producer b. producer c. consumer d. governmentarrow_forwardSuppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?arrow_forward
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