Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 7CQ
To determine
Black markets.
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Economics: Private and Public Choice (MindTap Course List)
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- What polices would lead to unintended consequences like black markets? Explain Explain in detail.arrow_forwardWhen compared to the results in competitive markets, monopoly markets can be expected to have restricted output and lower prices have restricted output and higher prices have higher prices and equivalent output have lower prices and equivalent outputarrow_forwardWrite legibly, what I cannot read I cannot grade. Make sure that you label the graph completely and indicate all known information on the graph. Consider the labor market. Draw a graph illustrating an effective minimum wage in the labor market. Please make sure to label the axes accordingly and state who the supplier (workers or firms) and who the demander is (workers or firms). Indicate (clearly) consumer surplus, producer surplus, and deadweight loss in your graph.arrow_forward
- What are three reasons that a government might want to intervene in markets?arrow_forwardWhat is the right of subrogation? When does the right of subrogation arise?arrow_forwardWe've seen how many economists vehemently oppose price controls, saying that they'll create either shortages (price ceilings) or gluts (price floors). How do studies of minimum wage (a price floor) challenge this orthodoxy?arrow_forward
- A “black market” is a place where people make illegal trades in goods and services. For instance, during the Soviet era, it was common for American tourists to take a few extra pairs of Levi’s jeans when visiting the Soviet Union: They would sell the extra pairs at high prices on the illegal black market. Consider the following claim: “Price-controlled markets tend to create black markets.” Let’s illustrate with the following figure. If there is a price ceiling in the market for cancer medication of $50 per pill, what is the widest price range within which you can definitely find both a buyer and a seller who would be willing to illegally exchange a pill for money? (There is only one correct answer.)arrow_forwardWhat is the black market you have personally seen?arrow_forwardThe minimum wage law may distort the market for non-skilled labor. To reduce the distortion, some economists suggest a two-tier minimum wage system, where employees over age 19 have a minimum wage and employees under age 20 could earn wages below that figure. Give two reasons why economists think the minimum wage affects the under-20 labor market more than othersarrow_forward
- What are the possible reasons why the government may make a market intervention? What are the possible implications of such interventions? How might the wedge between consumers and firms lead to market distortions?arrow_forwardIn 1994, 565 economists sent President Bill Clinton a letter warning against the economic consequences of price controls that played such a prominent role in his healthcare reform plan. The price controls included mandated fee schedules for a fee for service medical plans, perspective budgets for regional health alliances, increases in health insurance premiums tied to the cost of living, and price ceilings on prescription drugs. Discuss the economics of price controls. Under what circumstances do they accomplish their intended purpose? When do they fail?arrow_forwardUsing a supply-demand diagram, show a labor market with a binding minimum wage. Now, use the diagram to show those who are helped by the minimum wage, and those who are hurt by the minimum wagearrow_forward
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