During our discussion of price controls, we covered a concept called “concentrated benefits, dispersed costs.” Briefly explain what it means and then give an example of applying it to say, farm price supports (a type of price control we covered, but other examples may be used
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- The United States government subsidizes many so-called green companies. For instance, it has given millions of dollars to solar panel companies. In the market for solar power, illustrate what the government subsidies mean.Just wondering if as a tutor you agree or disagree with this... Price controls are government-mandated minimum or maximum prices that are set for certain goods and services. Currently, the government is intervening in drug price controls. According to New York Times, the Biden administration is advocating to limit prices for prescription drugs, calling the government to negotiate with drug makers on prices and applying those prices to both Medicare and all drug purchasers in the country. The house passed a bill that would establish price limits for certain drugs based on what other countries pay. Some parties are not likely to benefit from this. Steve Ubl, the C.E.O. of the industry trade group PhRMA stated, "major across-the-board price reductions would result in reduced revenues for drug companies, and could hurt companies’ ability to spend on research as well as cause smaller companies to close if investors leave the sector" (Katz, 2021). Some democratic lawmakers have concerns…Example 2: In fall of 2011, the National Christmas Tree Association decided to impose a fee/tax of $0.15 per tree sold.² They claimed the tax revenue raised would fund a new marketing campaign for Christmas tree growers in response to growing plastic tree imports. The proposal quickly drew controversy: some argued that the fee/tax would be passed along in higher prices to consumers, but the National Christmas Tree Association says no. How does the answer to this question depend on the assumption about the price elasticity of demand? a. Consider two graphs of the market for Christmas trees. The supply curve in each market is assumed to be the same. In the left graph, assume the price elasticity of demand is relatively inelastic and in the right graph, assume the price elasticity of demand is relatively elastic. Add labels on your diagram to identify the equilibrium price and quantity of trees before the tax. b. Now, suppose retailers are assessed a tax of amount for each tree sold.…
- Suppose that, in a competitive market without government regulations, the equilibrium price of donuts is $1.00 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 $0.80 each. There are many teenagers who would like to work at donut shops, but they are not hired Binding due to minimum-wage laws. The government has instituted a legal minimum price of $0.80 each for donuts. Non-bindingSuppose 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.Your uncle is very upset because after a recent snow storm he was charged $300 by a private snow- removal company to clear his driveway. He wants to petition the local village government to pass a law to put a cap on how much firms can charge for clearing driveways. As a student of economics, your uncle asks your advice on the wording of his petition. Provide a short response to your uncle in the form of a letter. Do you agree with him on the price ceiling, or disagree? How should this issue best be addressed?
- The government decides to place a £25 per unit-subsidy on the sales of books. The initial demand and supply curves for books in this country are respectively: Qd = 1000 – 2*P and Qs = 3*P + 500 where price in measured in Great British Pounds per book. a) What is the pre-subsidy equilibrium price and equilibrium quantity of books? Illustrate demand and supply curves and the market equilibrium in a diagram indicating the respective intercepts. What are Consumer and Producer Surplus in this market? b) How many books will be traded once the £25 subsidy is enacted? How much will consumers pay per book? Illustrate the effects of the subsidy on the equilibrium quantity and price of books in a diagram (you can use the diagram drawn in part a)). What are Consumer and Producer Surplus in this market with the subsidy in place c) What is the change in consumer and producer surplus following the introduction of this subsidy? Calculate the monetary value of these changes and identify the respective…How can a government subsidy help with the importation of face masks? Please use agraphs to illustrate.This problem deals with the effects of a price control (or a price ceiling). Suppose that the market demand curve is given by P = 6- (1/1000)Q and that the market supply curve is given by P 1(1/1000)Q. Note that, in doing the calculations below, it's easier to leave the (1/1000) factors as is without converting to a decimal Substituting this solution back into the demand function, the equilibrium price is P (put two digits after the decimal point). Suppose that the market demand comes from adding up the a) Set the P values equal using the above formulas, and solve for the equilibrium quantity in the market. This quantity is given by Q demands of 1000 identical consumers. Using the above Q solution, individual consumption at the market equilibrium is equal tounits (put one digit after the decimal point) b) Now suppose the government institutes a price control, setting the price of the good at P 2. At this price, the quantity supplied equalsunits (set P 2 in the supply formula and solve…
- Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 11.5 – Q Supply: P = 5.5 + Q Price is in 10 Yuan (¥) per bushel of soybeans and the units for Quantity are 100 million bushels per year. This is to make graphing simpler. This does NOT mean that the price is 10 and quantity is 100. Rather it means that if the price was 40¥ and the quantity was 7,500,000,000 bushels, this would plot as 4 and 7.5 respectively. The world price for soybeans is ¥65/bushel (this would graph as 6.5). Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including: Domestic Demand curve (D), Domestic Supply curve (S), the World Price (WP), and the Price with tariffs (PT).Are Prohibitions Against Price Gouging Good or Bad? What happens to the prices of items like generators, fuel, plywood and ice during natural disasters? Explain. (Note: Supply and demand analysis is helpful here.) Should government impose price controls? If the controls keep the prices from rising, how will this affect the flow of these items into the disaster area?The demand and supply of widgets is given below. Q is quantity, and P is price of widgets Q = 5000 – 6P Q = 1000 + 2P How much is equilibrium quantity and equilibrium price (show me your work) If there is a price control of $700 imposed by the government for widgets. What type of price control is this called? Does this type of price control cause a shortage or surplus, and how much is it. Draw the Demand and Supply, and show the point for part a and b.