Due to Covid, the unemployment rate increases sharply. Many households are not able to afford to pay rent for their housing. The government decides to implement price controls so that households continue to afford their rent. The demand function in the perfectly competitive house-renting market is given by: P = 2000 - 2Q. The supply function is given by: P = 1500 + 3Q. Which of the following price ceilings will be binding? P = 1500 P = 1850 P = 1900 P= 1800 None of the other answers is correct.
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- The Reinheitsgebot is a set of laws established in the 1500s that regulate the production and sale of beer in Germany. Among its provisions, the edict set maximum prices that brewers could charge at various times of the year: During Oktoberfest, the price for one [Bavarian Liter] is not to exceed one Pfennig (Penny, Munich value). Suppose that the demand for beer is given by $QD = 6000-1600P, and the supply of beer is given by QS = -1000+2000P. %3D Calculate the equilibrium price and quantity in a free market; then calculate consumer and producer surplus.The Reinheitsgebot is a set of laws established in the 1500s that regulate the production and sale of beer in Germany. Among its provisions, the edict set maximum prices that brewers could charge at various times of the year: During Oktoberfest, the price for one [Bavarian Liter] is not to exceed one Pfennig (Penny, Munich value). Suppose that the demand for beer is given by $QD = 6000-1600P, and the supply of beer is given by QS = -1000+2000P. Calculate the consumer surplus received by beer drinkers and the producer surplus received by beer producers after a 1-Pfennig price ceiling is imposed.New York City has a long-standing policy of controlling rents in certain parts of the city—in essence,a price ceiling on rent. Is the market for apartmentslikely to be efficient or inefficient? What does thisimply for the size of total surplus?
- Consider a regional with a uniform distribution of population where every household consumes the same amount of a good. The regional government recently stated its policy for the location of factories making the good: “A factory should reach the minimum point of its average production cost curve at an output of 1000 units. Since the total demand for the good is 4000 units, we should have 4 factories in the region. Since the distribution of the population is uniform, the factories should be distributed uniformly throughout the region” Comment on this policy as to in particular whether there should be more or fewer factories for efficiency?The diagrams below depict the computer market with fixed prices (graph a) and flexible prices (graph b), where DL corresponds to a low level of demand for computers, DM Corresponds to a medium level of demand for computers, and DH corresponds to a high level of demand for computers. Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. Flexible Prices (b) Fixed Prices (a) $1,400 C' $1,200 B DH B' $1,200 DH $900 DM DM DL 900 DL 700 900 1,150 Computers per week Computers per week of demand to of a. Suppose there is a negative demand shock, and demand unexpectedly falls from a medium demand. Assuming fixed prices, what will happen to the firm's inventory of computers? O The firm's inventories will not change. O The firm's inventories will increase by 250 computers per week. O The firm's inventories will increase by 200 computers per week. O The firm's inventories will decrease by 150 computers per week. b. Now suppose prices are…Consider a competitive market with a perfectly elastic supply curve and a perfectly inelastic demand curve. Suppose the price of an input that is required for the production of the good that is traded in this market increases. Suppose further that a positive quantity of the good is traded in equilibrium after the increase of the input price. One of the following statements is true. Which statement is true? The equilibrium quantity of the good traded in the competitive market after the increase of the input price is strictly higher than before the increase of the input price. A The equilibrium quantity of the good traded in the competitive market is the same before and after the increase of the input price. The equilibrium quantity of the good traded in the competitive market after the increase of the input price is strictly lower than before the increase of the input price. C
- When the Covid-19 pandemic hits, chicken sellers are likely to raise chicken prices due to rising costs. The government had to act by setting a ceiling price for the supply of chicken in the market. The original price of chicken is RM6 per kilo. At that time, it is assumed that the equilibrium quantity is 1000 chickens. But the government has set the ceiling price at RM8 only. Draw and briefly explain a curve that illustrates the situation where ceiling pricing takes place in the sale of chicken in the market.19 of 38 In the market for designer shoes, the demand function (D) is Q=210–1.00P, where P is the price paid by consumers in dollars per pair of designer shoes and Q is the quantity demanded in thousands. Suppose the supply curve (S) for designer shoes is estimated to be: Q=1.00P. Given this information, the equilibrium price and quantity (respectively) for designer shoes would be given by: O A. P=$115; Q=125,000 O B. P=$135; Q=165,000 O C. P=$105; Q=105,000 O D. P=$125; Q=145,000 UnsureSuppose that you are the vice president of operations of a manufacturing firm that sells an industrial lubricant in a competitive market. Further suppose that your economist gives you the following supply and demand functions: Demand: = 50 – 2P Supply: Q° = - 10 +P. What is the consumer surplus in this market? Consumer surplus is $ (Enter your response rounded to two decimal places.) What is the producer surplus? Producer surplus is $ (Enter your response rounded to two decimal places.)
- Another strategy Alex can increase his economic profit is to set an all-or-nothing price lower than the monopoly price. The all-or-nothing pricing strategy requires a consumer to buy all the apples at a given price. If Alex sets the all-or-nothing price at $6.25, calculate the economic rent andconsumer surplus under all-or-nothing pricing for different quantities. What is the optimal all-or- nothing quantity Alex should sell to maximize economic profit?Since 1996, market prices for helium have seen consistent increases based on high demand in the technology sector. Many households have felt the impact directly when purchasing helium for birthday balloons. The U.S. government controls roughly 75% of the world’s helium supply, and in 1996, it set a price floor for the helium market, which outlaws the sale of helium below $64 for 1,000 cubic feet. Suppose that the graph below illustrates the market for helium after the price floor was implemented. (a) Because the price floor is set below the equilibrium price, the price control is ____ (b) In the current market, a price floor of $64 would ___ the quantity of helium gas bought and sold. (c) The quantity bought in the market is ___ cubic feet. (d) The quantity sold in the market is ____ cubic feet.Suppose that, in a competitive market without government regulations, the equilibrium price of donuts is $1.50 each. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. Statement Price Control Binding or Not The government prohibits donut shops from selling donuts for more than $2.00 each. The government has instituted a legal minimum price of $2.00 each for donuts. Due to new regulations, donut shops that would like to pay better wages in order to hire more workers are prohibited from doing so.