EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Chapter 6, Problem 4QR
To determine
The reason why economists oppose
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Explain why economist usually oppose controls on prices.
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EBK ESSENTIALS OF ECONOMICS
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- Suppose demand decreases and supply decreases. Which of the following will happen? Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. The change in equilibrium price and quantity cannot be determined.arrow_forwardAnalyse how an increase in wages can conflict with the government objectives of price stabilityarrow_forwardSuppose the market for steel is expressed as follows: Domestic demand: p = 40 - 0.2q, or q = 200 - 5p Domestic supply: p = 0.2q, or q = 5p Domestic supply (foreign): p = 0.1q, or q = 10p a) What is the equilibrium price and quantity if there is free trade, with no restriction on imports? b) What is the equilibrium price and quantity if the government imposes a binding import quota of 20 units? Depict parts a and b on a single graph. c) How are US steel firms affected by the quota? US automakers? Explain briefly.arrow_forward
- if the government imposed a price ceiling on oil and gas prices? How would this affect the market in terms of demand and supply? Would this be feasible?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_forwardIn Country Faraway, cigarettes are forbidden, so people trade cigarettes in a black market. The cigarette demand is QD = 12 − P , and the cigarette supply is Qs = 2P . Find the equilibrium price and quantity in the black market. The government becomes aware of the black market and reinforces the police so that half of the cigarette supply would be seized and destroyed. Under this circumstance, what are the demand and supply functions? What is the new equilibrium price and quantity? Show the change by using a supply and demand diagram.arrow_forward
- If people can't afford the equilibrium price for a good, would it be a good idea for the government to force the producer to produce it and give it to the poor people? Why or why not?arrow_forwardSuppose the demand and supply of firearms in Jail are given as follows: Demand: P = 630 − 349Q Supply: P = 480 + 2Q in which Q is the quantity of firearms in million units and P is the price per each firearm in Jalian dollars. a. The equilibrium price is [ANS1] Jalian dollars and the equilibrium quantity is [ANS2] million units. b. Suppose the government purchases 10 million units of firearms back from the market. After the government enters the market, on the new demand curve, when the price is 555 Jalian dollars, the total quantity demanded is [ANS3] million units of firearms. c. Suppose the government wants to use such buyback program to reduce the quantity of firearms in the community to zero. The government will need to buy at least [ANS4] million units of firearms from the market and spend at least [ANS5] million dollars. d. Suppose the government wants to use taxation to reduce the quantity of firearms in the community to zero. The government will need to impose a…arrow_forwardIf demand increases and supply simultaneously increases, equilibrium price will rise. True or Falsearrow_forward
- Gasoline "prices at the pump" go up and down, and Oil "costs per barrel" go up or down, but they do so at different rates and even in opposite directions sometimes. We want to think that demand and supply control prices where the cost of crude oil is set by the same economic conditions that determine the gas price. What are these mismatched trends (graphs of each are shown in the following web links) telling us about how demand and supply work in the market? http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EER_EPMRU_PF4_Y35NY_DPG&f=A http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=Aarrow_forwardwhat is an example of existing demandarrow_forwardThe demand for corn is given by: QD= 240 -P. The supply of corn is given by: QS= 9P -760. The government has a price support policy of $180. Calculate the dollar amount of government expenditures for the price support policy. (Do not include a $ sign in your response. Round to the nearest two decimal places if necessary.)arrow_forward
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