Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 2CQ
To determine
The effect of rent control on college students.
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To protect the well-being of the tenants, some legislators in Hong Kong suggest imposing a rent control. Explain the effects of a rent control on the market for rental housing, changes in the behavior of the landlords as a result of, and explain why these imply inefficiency.
Discuss the economic rationale and two major consequences of a price ceiling on a product in a mixed economy .
The City Council of Lincoln, Nebraska has proposed raising the minimum wage in their city up
to $12.50 per hour up from the current level of $9.50. They are not sure what to do because they
want people to make more money but they also want as many people as possible to have jobs.
They are asking you to analyze the situation using the chart below and tell them what you think
will happen if they go through with it and actually raise it to $12.50 per hour.
$16.00
23,000
32,000
9,000
$12.50
$9.50
$7.50
42,000
74,000
At a Minimum Wage of $12.50 per hour what is the level of Excess Supply of Workers willing to work at
that wage?
74,000
0
↑
51,000
quantity
Chapter 4 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
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- A city's state cabinet has agreed on a rent freeze for five years to counter rising housing costs in the city. Only housing built since 2014 and some social housing will be exempt from the freeze. Discuss the effect of this policy on the quality and quantity of housing, on landlords and tenants, and on other markets.arrow_forwardThe following graph plots a supply curve (orange line) for a group of recent graduates looking to sell used air fryers. Each seller has only a single used air fryer available for sale. Think of each rectangular area beneath the supply curve as the "cost," or minimum price that each seller is willing to accept. Assume that anyone who has a cost that equals the market price is willing to sell their used air fryer. 180 150 PRICE (Dollars per used air fryer) 60 60 90 90 120 30 0 0 ㅁ Raphael Y X ☐ Susan ☐ Clancy ☐ Becky Alex ㅁㅁ Eileen +> 1 2 3 4 5 6 QUANTITY (Used air fryers) Region X (the purple shaded area) represents total producer surplus when the market price is equal to $ area) represents when the market price , while Region Y (the grey shaded In the following table, indicate which statements are true or false based on the information provided on the previous graph. Statement True False Assuming each seller receives a positive surplus, Raphael will always receive less producer surplus…arrow_forwardThe city of Montrose recently imposed a price ceiling on cookies, limiting the price of a cookie to $1 each. Before the price ceiling was imposed, the equilibrium price of a cookie was $2 each. All of the following are likely consequences of this price ceiling EXCEPT Choose 1 answer: (Choice A) a black market for cookies (Choice B) higher opportunity costs (Choice C) an increase in the size of cookies (Choice D) a decrease in cookie quality (Choice E) shortagesarrow_forward
- A binding price ceiling is imposed in the market for aspirin. At the ceiling price: a) the quantity supplied of aspirin exceeds the quantity demanded. b) the quantity demanded of aspirin equals the quantity supplied. c) the quantity demanded of aspirin exceeds the quantity supplied. d) the quantity demanded of aspirin will be artificially restricted by the price ceiling.arrow_forwardThe town council is contemplating the imposition of a R350 per month rent ceiling on apartment rooms in the town. An economist at the university estimates the demand and supply curves as: QD = 5600 - 8P QS = 500 + 4P, where P = monthly rent, and Q = number of apartments available for rent. For purposes of this analysis, apartments can be treated as identical. a) Calculate the equilibrium price and quantity that would prevail without the price ceiling.[1] b) Calculate producer and consumer surplus at this equilibrium. [3] c) Provide a rough sketch of the information calculated in (a) and (b). [2] d) What quantity will eventually be available if the rent ceiling is imposed? What is the amount of the shortage? [2] e) Calculate then resulting impact on consumer and producer surplus.[3] f) What is meant by deadweight loss? Why does a price ceiling usually result in a deadweight loss? In your answer explain the impact on both producers and consumers. [4]arrow_forwardSuppose that the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling?arrow_forward
- 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?arrow_forwardIn a city where the equilibrium hourly wage for unskilled, entry-level workers is $11, the U.S. federal minimum wage of $7.25 will have no effect. It is a non-binding price floor. will have no effect. It is a non-binding price ceiling. will increase the equilibrium wage from $11 to something higher. will bring the equilibrium wage from $11 down to $7.25. will discourage unskilled workers from entering the labor market.arrow_forwardIf an effective ceiling price is placed on hamburgers, thenarrow_forward
- Find an example of MFN clause (other than the ones mentioned in the chapter) and discuss their relevance in preventing price competitionarrow_forwardWhat is the minimum price that producer is willing to accept for 1500 bottles? Price per Ice-cream (Rs.) Demand for Ice cream (Qd) Supply for Ice cream (Qs) 140 500 1500 120 750 1200 100 1000 1000 80 1250 750 60 1500 600 40 1750 300arrow_forwardSuppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, thearrow_forward
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