Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 7, Problem 4MCQ
To determine
To select:
The appropriate option for the given statement.
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D. Instead of a ceiling, suppose the government places a price floor of $18. Explain the effect of the price floor.E. Highlight the difference between a change in demand and a change in quantity demanded.F. Identify ONE (1) factor that could lead to a rightward shift in the supply curve.
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?
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?
Chapter 7 Solutions
Foundations of Economics (8th Edition)
Ch. 7 - Prob. 1SPPACh. 7 - Prob. 2SPPACh. 7 - Prob. 3SPPACh. 7 - Prob. 4SPPACh. 7 - Prob. 5SPPACh. 7 - Prob. 6SPPACh. 7 - Prob. 7SPPACh. 7 - Prob. 8SPPACh. 7 - Prob. 9SPPACh. 7 - Prob. 10SPPA
Ch. 7 - Prob. 11SPPACh. 7 - Prob. 1IAPACh. 7 - Prob. 2IAPACh. 7 - Prob. 3IAPACh. 7 - Prob. 4IAPACh. 7 - Prob. 5IAPACh. 7 - Prob. 6IAPACh. 7 - Prob. 7IAPACh. 7 - Prob. 8IAPACh. 7 - Prob. 9IAPACh. 7 - Prob. 1MCQCh. 7 - Prob. 2MCQCh. 7 - Prob. 3MCQCh. 7 - Prob. 4MCQCh. 7 - Prob. 5MCQCh. 7 - Prob. 6MCQCh. 7 - Prob. 7MCQCh. 7 - Prob. 8MCQ
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- An effective price floor causes the quantity exchanged to _______ and the price of the product to ______ compared to the market equilibrium. Question 4Answer a. decrease, decrease b. increase, increase c. increase, decrease d. decrease, increasearrow_forward4. The rent control agency of Rochester has found that aggregate demand is P = 500 – 5QD. Quantity, QD, is measured in thousands of apartments. Price, P, equals the monthly rental rate in dollars. The city’s board of realtors acknowledges that this is a good demand estimate and has shown that supply can be expressed as P = 5QS. a. If the agency and the board are right about demand and supply, respectively, what is the free-market price? How many apartments are rented? B. If we assume an average of 3 persons per apartment, what is the expected change in city population if the agency sets a maximum average monthly rent of $100 and all those who cannot find an apartment leave the city?arrow_forwardwhat is the effect of a price floor in market of the goods in economicsarrow_forward
- Consider an economy where many farmers plant and sell sugar cane for a living. (a) Discuss the welfare effects when the government implements a price floor in the sugar cane market to help the sugar cane farmers. Support your answers with a suitable sugar cane market diagram. Are the sugar cane farmers better off with this policy? Explain. (b) How would your answer be different if the government commits to buy up all the sugar cane at the floor price from the farmers and sell to the consumers at a lower price to clear the stock? Discuss and support your answers with a suitable sugar cane market diagram.arrow_forwardWhat mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium? Also explain which causes a surplus of a good - price ceiling or a price floor. Give examples.arrow_forwardDefine price ceiling and price floor and give an example of each. Which leads to shortage and which leads to shortage?arrow_forward
- Please explain the right as well as the wrong answers One of the consequences of Price floor is a) Excess supply of the good, which could be perished b) Excess demand of the good c) There may be a surplus or shortage of the good d) There is a possibility of misallocation of resources If the market price rises consumer’s surplus a) Rises b) may fall c) declines d) may rise or fall If the market price falls producer’s surplus a) Rises b)may fall c) declines d) may rise or fall In the case of a Unit elastic supply of a good, the supply curve looks a) Flatter b) steeper c) downward sloping and neither steeper nor flatter d) upward sloping line with a 45-degree angle.arrow_forwardWhat is a the typical result of a price floor? Question 29 options: a) quantity supplied equals quantity demanded. b) Customers unable to obtain the product c) excess demand. d) excess supply.arrow_forwardMarkets seek equilibrium, and the demand for goods and services will come to an equilibrium with supply of goods and services. When markets are not in equilibrium, surpluses and shortages, as well as underground markets, can exist. Sometimes, the government may want to intervene in markets to try to help reduce economic hardships. Analyze the impact of an increase in the minimum wage from the current level to $15 per hour. How would the following be affected? a. employment of people previously earning less than $15 per hour b. the unemployment rate of teenagers c. the availability of on-the-job training for low-skilled workers d. the demand for high-skilled workers who are good substitutes for low-skilled workers Review the mechanics of price floors and price ceilings. Why does a price floor lead to surpluses? Why does a price ceiling lead to shortages? Review consumer and producer surplus. A price floor will lead to a transfer of consumer surplus to producer…arrow_forward
- MR PD Smith has heard that the government has proposed the imposition of a maximum price or price ceiling in the market for his product. He does not understand the implications of this proposed price ceiling on equilibrium in the market and has asked you to provide some clarity. The manufacturer would like to know the following Is there a possibility that the price ceiling could have no impact on equilibrium in the market?arrow_forwardIV. Before the pandemic, face masks were only used in certain hospitals handling highly contagious pulmonary diseases such as San Lazaro Hospitals and the ICUs of every hospital. However, studies and other health organizations and agencies talk about it’s effectiveness to prevent people from contracting the virus. Which of the following non-price determinants will affect the demand and in what way? How will it affect the country’s economy?arrow_forward
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