Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 7, Problem 11P
To determine
(a)
The area of
To determine
(b)
The area of consumer surplus and producer surplus if the
To determine
(c)
The deadweight cost of the tax.
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If a municipality sets a price ceiling below equilibrium for apartments in New York City,
Select one:
a. the price ceiling will create a surplus of apartments
b. the price ceiling will create a shortage of apartments
c. the price ceiling will not affect the market for apartments
d. the market for more broadway plays will increase
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A). Draw the supply and demand curves for the market of specific good.
B). Suppose that the equilibrium price for this product is $4 and the equilibrium quantity is 100 units. If the
government imposes a price ceiling of $3 what happens? Draw the new graph explaining how quantities are affected
by that decision.
C). Suppose that the equilibrium price for this product is $4 and the equilibrium quantity is 100 units. If the
government imposes a price floor of $5 what happens? Draw the new graph explaining how quantities are affected
by that decision.
(a) Define price ceiling and price floor and give an example of each. Which leads to a shortage? Which leads to a surplus? Why?
(b) Suppose the government removes a tax on buyers of a good and levies a tax of the same size on sellers of the good. How does this change in tax policy affect the price that buyers pay sellers for this good, the amount buyers are out of pocket (including any tax payments they make), the amount sellers receive (net of any tax payments they make), and the quantity of the good sold?
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