7. Consider the pros and cons of rent control in a large, densely packed city. Remember that rent control is a type of price ceiling. Why might we want to impose rent control? What are the drawbacks? If rent control is enacted, which people benefit from it?

7. Consider the pros and cons of rent control in a large, densely packed city. Remember that rent control is a type of price ceiling. Why might we want to impose rent control? What are the drawbacks? If rent control is enacted, which people benefit from it?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Effects of rent control Rent controls require that landlords set apartment prices below the equilibrium price level. An immediate effect is an apartment rental shortage (excess demand for apartments), because at the regulated price the quantity of apartments demanded is greater than the quantity supplied. When landlords are prevented by cities from charging market rents, which of the following listed outcomes are common in the long run? Check all that apply. The quantity of available rental housing units falls. Landlords earn lower profits from renting housing units, but the rent charged has no effect on either the quantity or quality of rental units. Nonprice methods of rationing emerge. Efficient use of housing space results.
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8. Consider the market for the Mona Lisa painting given by the following demand and supply curves: D: P = 1000-50QD and S: Qs=1 a. Draw the market for Mona Lisa paintings below. Label graph and axes. b. Calculate the equilibrium price and quantity of Mona Lisa paintings. Label P* and Q* on your graph from part a. C. Calculate consumer surplus and producer surplus. Label these (CS and PS) on your graph from part a. Suppose the French government imposed a $300 tax on buyers of Mona Lisa paintings. d. On the following graph, show the effect of the tax. Clearly label PBUYER PSELLER P, Q, QTAX CSTAX PSTAX, the tax revenue (TR), and DWL. (Here CSTAX PSTAX refer to consumer and producer surplus after the tax is imposed.) Calculate consumer surplus (CSTAX), producer surplus (PSTAX), deadweight loss (DWL), and the total tax revenue (TR) under the new tax. I e.
The diagram shows the market for apartments in a city. Assume that all apartments are identical. Suppose the government imposes a rent-controlled price of $500 per month on apartments in this city. In the long run we can expect the shortage of apartments units. to be 0 00 00 A. 1100 B. 600 C. 300 D. 0 E. 100 Price (dollars per month) 1,400 1,300 1,200- 1,100- 1.000- 900- 800- 700+ 600- 500- 400- 300- 0 S₂ Price B Price A Demand 200 400 600 800 1.000 1.200 1,400 Quantity of apartments 3
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4. For the last 80 years the U.S. government has used price supports to provide income assistance to American farmers. To implement these price supports, at times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, a policy by which the gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. Consider the market for corn depicted in the accompanying diagram. a. If the government sets a price floor of $5 per bushel, how many bushels of corn are produced? How many are purchased by consumers? By the government? How much does the program cost the government? How much revenue do corn farmers receive? b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels. How many bushels of corn are purchased by consumers and at what price? By the government? How much does the program cost the government?…