Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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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.
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- The 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_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 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_forward
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- Suppose that Santa Fe County, New Mexico officials propose establishing a county "living" wage of $15.00 per hour that all employers must pay. Suppose that the equilibrium in the Santa Fe County labor market for unskilled labor is $9.00 per hour with employment of 12,000. Assuming that the elasticity of demand for unskilled labor in Santa Fe County is 1.25, what is the expected reduction in employment if the higher minimum were established? (Use elasticity calculations assuming the competitive equilibrium as the base point.) (continuation of above) Suppose that the elasticity of supply to this labor market is 1.25. Find the change in supplier surplus that would occur if the higher minimum wage were enacted ***Need the bottom answer, can't figure out how to solve for it****arrow_forwardFind 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_forward
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