Econ ~ Ch.5
The U.S. government limits the amount of sugar that can be purchased from foreign sugar producers. Select the term that best fits the scenario.
quota
The table contains the supply and demand schedule for Bluefin tuna. Suppose all countries agree to limit tuna fishing to a total of 15,000 tons per year through a strictly enforced licensing program for fishermen. Price per Pound Quantity Demanded (tons) Quantity Supplied(tons) $11.80 12,000 27,000 $11.35 15,000 24,000 $10.90 18,000 21,000 $10.45 21,000 18,000 $10.00 24,000 15,000 $9.55 27,000 12,000 At the new fishing quota, what is the quota rent per pound of Bluefin tuna? Suppose the average fisherman can catch 200,000 pounds of Bluefin tuna every year ( 100 tons). What is the value of a Bluefin tuna fishing license?
$1.35 (11.35-10.00) $270000 (1.35*200,000)
Suppose a state passes a minimum wage law that increases the minimum wage from $5/hour to $20/hour. The equilibrium wage prior to the minimum wage hike was $10/hour. Which is likely to result from increasing the minimum wage? This result of increasing the minimum wage is an example of a
- some employers and workers will agree on a wage less than 20 an hour and not report the wages to the government - black market
The year is 1779 in Iceland. Light sources, such as oil lamps, are precious commodities (as harnessed electricity is not yet available). The government wants to intervene in the pricing of oil lamps so that its citizens do not pay outrageous amounts of money for lighting. The currency used in Iceland at the time is the rigsdaler. Consider the graph depicting Iceland's hypothetical supply and demand for oil lamps. 1. If Iceland's governor chooses to set a price floor of 15 rigsdaler for an oil lamp, what will occur? 2. If Iceland's governor chooses to set a price ceiling of 40 rigsdaler for an oil lamp, what will occur?
1. Nothing will change. 2. Nothing will change.
The table contains the demand and supply schedule for apartments in a city. Suppose the city council feels that the equilibrium rent is too high and imposes a price ceiling of $750/month. Rent/month Quantity demanded Quantity supplied $1,750 300 4800 $1,500 600 2400 $1,250 1200 1200 $1,000 2400 600 $750 4800 300 The price ceiling results in a (1) The city now has a shortage or surplus of how many apartments?(2)
1. shortage. 2. 4500
Suppose the graph represents the labor market for low-wage workers. A minimum wage of $8 per hour is being considered. If imposed, the minimum wage will result in a(1) of(2)
1. surplus 2. 200 workers
Alaskan king crab is one of the most prized shellfish. Suppose that, to protect their numbers, the Alaskan government allows only 15 million pounds of crab to be caught during the fishing season so that the Alaskan king crab population remains at an environmentally sustainable level. The graph includes the supply and demand curves for Alaskan king crab. Please label the graph appropriately. Not all terms will be used.
A,B = deadweight loss E = Quota rent Blue line= Quota Before the government imposes its regulations, what is the price per pound of crab? Answer: $3.50 What is the demand price after the quota? Answer: $4.00 What is the quota rent for Alaskan king crab? Answer: $1
Please identify the appropriate term for the following scenarios. Ivan, a Russian fishermen, needs a permit so that he can participate in commercial ice fishing for yellow perch and legally sell the perch he catches. Garet is an undergraduate student who has to work at McDonald's part-time to help pay his tuition loans. Always looking on the bright side of things, he is thankful that he cannot make less than what he is earning, $7.25 /hour. D'Artagnan, a poor French noblemen, discovers a large cache of truffles in his backyard. However, the government caps the sale of truffles at $100 /pound, which frustrates D'Artagnan because he knows they are worth more than that. Athos is an avid collector of swords, but as they are illegal to purchase, he obtains them through illicit means. To help out farmers, the government sets the minimum price of potatoes at $26 per bushel. Minimum potato price In order to support domestic sales of textiles, the country of Germany puts a cap on the amount of foreign textiles it imports.
Ivan's permit: License Garet's wage: Price Floor The truffles price cap: Price Ceiling Buying swords illegally: Black Market Minimum potato price: Price Floor Cap on imports: Quota
The graph of a labor market is shown. Place the endpoints of the minimum wage line to indicate a binding minimum wage in this market.
Put minimum wage at top
Suppose the graph depicts a hypothetical market for concert tickets at a local college venue. Because students are paying such high prices, a price ceiling of $40 per concert is being considered. Move the price ceiling line to correctly depict the price ceiling of $40. By how much does consumer surplus (CS) change if the price ceiling is imposed? By how much does producer surplus (PS) decrease if the price ceiling is imposed? What is the value of the deadweight loss (DWL) associated with this price ceiling?
Unknown Answer
Suppose the city council in a large city decides to pass a law which forces landlords to charge a maximum rent of $750/month for a one-bedroom apartment. Prior to the rent control, the average rent for a one-bedroom apartment was $1,750/month. Which is likely to occur as a result of the price ceiling? The answer above is an example of
Which of the following is likely to occur as a result of the price ceiling? Answer: Landlords will begin decreasing the quality of one bedroom apartments by not making repairs or paying for upkeep. The answer above is an example of: Answer: inefficiently low quality.
Suppose that policy makers, for any number of reasons, are worried about the price of milk becoming too low. The graph of the market for milk is shown. What type of price control would policy makers use to keep the price of milk from getting too low? Suppose that the government does implement the appropriate price control you selected previously. Which of these prices would be binding?
a price floor $7
Suppose the table represents the labor market of Georgia. Wage ($/hour) Quantity of Labor Demanded (# of workers) Quantity of Labor Supplied (# of workers) 7.00 38,000 34,000 7.50 36,000 36,000 8.00 34,000 38,000 8.50 32,000 39,000 9.00 30,000 40,000 If Georgia enacts a minimum wage of $8.00 per hour, the labor market will experience
a surplus of 4,000 workers.
The graph shows the supply and demand curve for dry erase markers. Suppose the government decides to impose a binding price ceiling on the market. Please place the price ceiling line segment to illustrate this new government policy. Shade in the deadweight loss (DWL) that arises due to the price ceiling. After the price ceiling is implemented, what exists?
graph - ceiling is at lowest points. DWL is in the armpit of left side of graph a shortage
For a number of reasons, governments set price floors for many agricultural products. Assume the government sets a price floor of $3.50 per bushel of corn. Assume a competitive market. Add and adjust the DWL triangle in the accompanying graph to show the deadweight loss due to the price floor. Without the price floor, what would the equilibrium price per bushel be? With the price floor in place, what is the amount of the surplus?
https://www.google.com/search?q=dwl+price+ceiling&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjInZqGzPjfAhVlrVQKHS93BSMQ_AUIDigB&biw=1434&bih=706#imgrc=FA7SJNeUd0Rn-M: equilibrium price: $ 2.50 surplus: 1 billion bushels
Ivan, a Russian fisherman, needs a permit to fish and sell a certain type of fish, the yellow perch. Select the term that best fits the scenario.
license
Steve decides not to rent out his second home since he is not allowed to set the rate above $1000 per month even though he knows he could find renters willing to pay much more. Select the term that best fits the scenario.
price ceiling
Garret is an undergraduate looking for a job to pay for college. As Garret seeks employment, he is glad to know that he will be paid at least $7.25 per hour. Select the term that best fits the scenario.
price floor
Rent controls are a typical example of a price ceiling. Please select all likely consequences of rent controls when the price ceiling is binding.
reductions in apartment quality more subletting of apartments inefficient allocation of apartments black markets