Economics 1021A/B Lecture Notes - Lecture 6: Deadweight Loss, Opportunity Cost, Demand Curve

67 views4 pages

mauveporpoise978

24 Jan 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

mariameelguendou and 38538 others unlocked

ECON 1021A/B Full Course Notes

Verified Note

94 documents

Document Summary

A price ceiling or price cap is a regulation that makes it illegal to charge a price higher than a specified level. Example: rent ceiling in the housing market (if the price ceiling is set above the equilibrium rent, it has no effect. The market works as if there were no ceiling. ) A rent ceiling is set at a month. So the equilibrium rent is in the illegal region. At the rent ceiling, the quantity of housing demanded exceeds the quantity supplied (shortage) A price floor is a regulation that makes it illegal to trade at a price lower than a specified level. Example: minimum wage in the labour market (if the price floor is set below the equilibrium price, it has no effect. The market works as if there were no price floor). A minimum wage is set at per hour. The quantity of labour supplied exceeds the quantity demanded (surplus; unemployment)

Related Questions

Consider the market for rental housing in Your town. The demand and supply schedules for rental housing are given in the table.

Price ($ per month)	Quantity Demanded (thousands of units)	Quantity Supplied (thousands of units)
1100	40	80
1000	50	77
900	60	73
800	70	70
700	80	67
600	90	65
500	100	60

In a Free market for rental housing, what is the equilibrium price and quantity?
Now suppose the government in Your town decides to impose a ceiling on the monthly rental price. What is the highest level at which such a ceiling could be set in order to have any effect on the marker? Explain your answer.
Suppose the maximum rental price is set equal to $500 per month. Describe the effect on quantity demanded, supplied, and exchanged in the rental-housing market.
Suppose a black market develops in the presence of the rent controls in part (c). What is the black market price that would exist if all of the quantity supplied were sold on the black market?

harlequincrow283

QUESTION 38

You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?

	a.	The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline.
	b.	The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.
	c.	The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.
	d.	The binding price ceiling will encourage oil companies to deplete the resource too quickly.
	e.	The binding price ceiling will cause firms to produce only gasoline of the highest quality.

1.05000 points

QUESTION 39

If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing:

	a.	increasing returns from specialization.
	b.	diseconomies of scale.
	c.	economies of scale.
	d.	constant returns to scale.
	e.	diminishing marginal product.

1.05000 points

QUESTION 40

A(n) __________ in the elasticity of supply or demand in a market for a good that is taxed would tend to __________ tax revenue from that tax.

	a.	increase; increase
	b.	increase; have no effect on
	c.	decrease; have no effect on
	d.	decrease; decrease
	e.	increase; decrease

1.05000 points

QUESTION 41

The costs of a market activity paid for by an individual engaged in the market activity are:

	a.	external costs.
	b.	social costs.
	c.	common costs.
	d.	free-rider costs.
	e.	internal costs.

1.05000 points

QUESTION 42

Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?

	a.	Equilibrium price will go down and equilibrium quantity will be indeterminate.
	b.	Equilibrium price will go up and equilibrium quantity will go down.
	c.	Equilibrium price will go up and equilibrium quantity will be indeterminate.
	d.	Equilibrium price will go down and equilibrium quantity will go up.
	e.	Equilibrium price will go up and equilibrium quantity will go up.

1.05000 points

QUESTION 43

The minimum wage law is an example of a:

	a.	price floor.
	b.	law that sets the minimum number of hours that an employee must work for wages during the week.
	c.	law that allows individual employers and employees to make free decisions.
	d.	law that requires quantity demanded to equal quantity supplied.
	e.	price ceiling.

taupezebra466

Question 1

During a crisis such as Hurricane Katrina, governments often make it illegal to raise the price of emergency items like flashlights and bottled water. In practice, this means that these items get sold on a first-come, first-served basis. If a person has a flashlight that she values at $5, but its price on the black market is $40, what gains from trade are lost if the government shuts down the black market?

		$30
		$35
		$40
		Indeterminant with the given information.

2 points

Question 2

Which of the following is an example of a price floor?

		A sale price with a limit on the quantity you can purchase.
		Rent-controlled apartments
		Predatory pricing designed to put a competitor out of business.
		The minimum wage

2 points

Question 3

Airline regulation of the 1970s produced a similar result to which of the following government interventions?

		The Affordable Care Act
		Minimum wage laws
		Rent control laws
		Communism

2 points

Question 4

Which of the following is a possible effect of a price ceiling?

		A surplus of the good.
		Increases in product quality.
		Increased gains from trade.
		People will waste time in lines waiting to purchase the good.

2 points

Question 5

What is a price ceiling?

		A minimum price consumers are willing to pay.
		A minimum price allowed by law.
		A maximum price allowed by law.
		A maximum price consumers are willing to pay.

2 points

Question 6

Why are the long lines generated by a shortage worse than paying a higher price in money?

		It is not better or worse. Paying in time and paying in money are essentially the same in a market economy.
		Paying with time reduces the value of money, and prevents valuable trades from occurring.
		Waiting in line is a waste of a valuable resource: time. Paying a price in money transfers the value of resources from one person to another, and maximizes the value of resources.
		Paying with time gives those who do not work an advantage over those who do.

2 points

Question 7

Which of the following is a possible effect of a price floor?

		The quantity supplied exceeds the quantity demanded.
		Increased gains from trade.
		Decreases in product quality.
		A shortage of the good.

Economics 1021A/B Lecture Notes - Lecture 6: Deadweight Loss, Opportunity Cost, Demand Curve

ECON 1021A/B Full Course Notes

Document Summary

Get access

Related Questions