answer the question in the file

Anonymous
timer Asked: Oct 3rd, 2018
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Question description

Assume you are a policymaker in Washington DC. Lobbyists for the dairy farmers of America have put pressure on their representatives to put a price control on milk. You have been assigned a position on a new committee to study the impact of such a control.

Your job is to:

  1. Determine which type of price control would benefit the farmers, a price ceiling or a price floor.
  2. Illustrate using a supply and demand graph what such an artificial price looks like.
  3. Explain what the results of such a move are for the milk

NAME: ______________________________________________ Problem Set 1 1. Based on the information provided for the market for video games, answer the following questions. PRICE $50 $45 $40 $35 $30 Q DEMANDED 5 7 9 11 13 Q SUPPLIED 17 15 13 11 9 a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph). b.) What is the equilibrium price and quantity? a.) b.) PRICE: ______________________ QUANTITY: ______________________ Now, assume that a new government report claims that video game play stimulates the brain. c.) What will this do to the demand curve? d.) What will happen to the equilibrium price and quantity? (rise, fall, stay the same) c.) d.) P: _______________________ Q: _______________________ 2. Assume you are a policymaker in Washington DC. Lobbyists for the dairy farmers of America have put pressure on their representatives to put a price control on milk. You have been assigned a position on a new committee to study the impact of such a control. Your job is to: a.) Determine which type of price control would benefit the farmers, a price ceiling or a price floor. b.) Illustrate using a supply and demand graph what such an artificial price looks like. c.) Explain what the results of such a move are for the milk market. In other words, will there be a SHORTAGE, a SURPLUS, or neither created? d.) Finally, what are the impacts of this price control for those who wish to purchase milk? (In other words, what is the unintended consequence of this action? How will people deal with this change in the market?) 3. Calculate the elasticity of demand for the following products. Note whether the demand is elastic or inelastic. Change in price 5% drop 12% rise 6% falls 15% increase 10% rise A new Cadillac Grapes Gasoline Municipal water Toll on turnpike Product Elasticity Change in quantity 10% increase 20% fall 4% increase 12% decrease 14% fall Elastic or Inelastic Cadillac _________________ ___________________ Grapes _________________ ___________________ Gasoline _________________ ___________________ Municipal water _________________ ___________________ Turnpike toll _________________ ___________________ 4. What is the profit maximizing output of this monopolist shown in the graph below? _______________________ What price do they set? _______________________ Provide two reasons why this price is not likely to fall. a. b. What is the price and quantity if this market becomes competitive? Price: _______________________ Price Quantity: ___________________ 10 8 MC ATC 6 D 4 MR 2 0 10 20 30 40 Output per day 50 Can a monopolist charge any price they wish? Why or why not? 5. Based on the following information for the state of Montana, a. Draw the Production Possibilities Curve. b. Determine the opportunity costs for a move from A to B; B to C; and C to D. CHOICE A B C D OIL / barrels 15000 12000 7500 0 WHEAT / bushels 0 10000 20000 25000 a.) b.) A to B: _____________ B to C: __________________ C to D: _________________

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TeacherCaleb
School: New York University

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