Consider the market for ice cream cones. Suppose that supply in this market is given by P^S = Q^S and demand is given by P^D = 30 - 4Q^D. Answer the following question. Suppose that the government is considering imposing a $4.00 price control as either a price ceiling or a price floor. Would this be a binding price control as a price floor or as a price ceiling? Will this cause a shortage or a surplus? Compute the size of the shortage or surplus that would result.

Consider the market for ice cream cones. Suppose that supply in this market is given by P^S = Q^S and demand is given by P^D = 30 - 4Q^D. Answer the following question. Suppose that the government is considering imposing a $4.00 price control as either a price ceiling or a price floor. Would this be a binding price control as a price floor or as a price ceiling? Will this cause a shortage or a surplus? Compute the size of the shortage or surplus that would result.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter4: Markets In Action

Section: Chapter Questions

Problem 13SQ

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Consider the market for ice cream cones. Suppose that supply in this market is given by ?? =?? and demand is given by ?? =30−4×??. Answer the following questions. a.) Suppose that the government is considering imposing a $4.00 price control as either a price ceiling or a price floor. Would this be a binding price control as a price floor or as a price ceiling? Will this cause a shortage or a surplus? Compute the size of the shortage or surplus that would result. b.) Suppose that instead of a price control, the government is considering imposing a $1.00 per ice cream cone tax in the market on producers. Compute the tax equilibrium quantity ???, the consumer effective price with the tax ??, the producer effective price with the tax ??, consumer tax incidence and producer tax incidence. c.) Notice that the competitive equilibrium (??,??) and the point (???,??) are both on the demand curve. Use them to compute the price elasticity of demand. d.) Notice that the competitive equilibrium…
The figure to the right illustrates the market for apples in which the government has imposed a price floor of $13 per crate. 20- 18- How many crates of apples will be sold after the price floor has been imposed? crates of apples per year. (Enter your response as an integer.) million 16- Supply Will there be a shortage or surplus? If there is a shortage or surplus, how large will it be? 14- 12- There will be a of million crates of apples per year. (Enter your response as an integer.) 10- 8- Will apple producers benefit from the price floor? 6- O A. Apple producers who are able to sell their apples at the $13 price per crate will benefit. 4- B. Apple producers who are not able to sell their apples will not benefit. 2- Demand C. Total revenue for apple producers as a group will decrease from $220 million to $208 million. 0- 4 8 12 16 20 24 28 32 36 40 Quantity (millions of crates per year) D. Both a and b. E. All of the above. Price
A government decides to set a price ceiling on bread so that bread is affordable to the poor. The conditions of demand and supply are given in the table below. What is the equilibrium price before the price ceiling? What will the excess supply or the shortage be if the price ceiling is set at $2.40? Price Qd Qs $1.60 9,000 5,000 $2.00 8,500 5,500 $2.40 8,000 6,400 $2.80 7,500 7,500 $3.20 7,000 9,000 $3.60 6,500 11,000 $4.00 6,000 15,000 A. $2.80; 1,600 shortage B. $2.80; 1,600 excess supply C. $2.40; 1,600 shortage
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The figure to the right illustrates the market for apples in which the government has imposed a price floor of $14 per crate. How many crates of apples will be sold after the price floor has been imposed? 14 million crates of apples per year. (Enter your response as an integer.) Will there be a shortage or surplus? If there is a shortage or surplus, how large will it be? There will be a surplus of 18 million crates of apples per year. (Enter your response as an integer.) Will apple producers benefit from the price floor? O A. Apple producers who are able to sell their apples at the $14 price per crate will benefit. O B. Apple producers who are not able to sell their apples will not benefit. O C. Total revenue for apple producers as a group will decrease from $220 million to $196 million. O D. Both a and b. O E. All of the above. Price 20- 18- 16- 14 12- 10- 8- 6- 4- 2- 0- 0 Supply Demand 4 8 12 16 20 24 28 32 36 40 Quantity (millions of crates per year)
What is the difference between a price ceiling and a price floor? If a price ceiling for a good is set below the market equilibrium, what will happen to the quality and future avail- ability of the good? Explain.
A market is described by the following supply and demand curves: QS = 3P QD = 400−P The equilibrium price is $ and the equilibrium quantity is . Suppose the government imposes a price ceiling of $120. This price ceiling is , and the market price will be $ . The quantity supplied will be , and the quantity demanded will be . Therefore, a price ceiling of $120 will result in . Suppose the government imposes a price floor of $120. This price floor is , and the market price will be $ . The quantity supplied will be and the quantity demanded will be . Therefore, a price floor of $120 will result in . Instead of a price control, the government levies a tax on producers of $40. As a result, the new supply curve is:
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