--%>
Assignment Help - homework help

Programs exchanged in the market

For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gizmos. Consider the given programs of government intervention:

Program I: The govt. obliges an excise tax of $2 per gizmo
Program II: The govt. gives a subsidy of $2 per gizmo for gizmo producers.
Program III: The govt. obliges a price floor of $30.
Program IV: The govt. obliges a price ceiling of $20.
Program V: The govt. permits no more than 8,000 gizmos to be generated.

Which of such programs would lead to a less than 10,000 units exchanged in the market? Explain briefly.

E

Expert

Verified

Program I: The excise tax will raise the price consumers pay to a level above $25, and lower the price producers obtain to a level beneath $25; therefore, the quantity exchanged in the market will fall beneath 10,000 units.

Program II: With the subsidy, the price producers obtain will rise to a level above $25; the price consumers obtain will fall beneath $25. Therefore, the equilibrium quantity exchanged will increase to a point above 10,000.

Program III: With price floor of $30, consumers will purchase less than 10,000 gizmos; therefore fewer than 10,000 will be substituted in the market.

Program IV: With price ceiling of $20, producers will provide less than 10,000 gizmos; therefore fewer than 10,000 will be substituted in the market.

Program V: By govt. fiat, less than 10,000 gizmos will be substituted.

   Related Questions in Business Economics

  • Q : Activities of speculators in long turn

    The activities of speculators tend to, in the long run: (w) decrease the volatility of prices. (x) attract legal attention resulting in imprisonment. (y) increase the level and volatility of prices. (z) yield tremendous profits and raise costs to cons

    		•
  • Q : Formally adopt inflation targeting

    Question: Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment? Answer:

  • Q : Fixed costs and Variable cost

    Questions: 1: Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

    Q : Assertion to increase in the minimum

    Use the circular flow model to confirm this assertion for a $1 per hour increase in the minimum wage?

    		•
  • Q : Speculators activities over the long-run

    Over the long-run the speculators activities are tend to: (1) decrease the volatility of prices. (2) attract legal attention and result in imprisonment. (3) increase the level and volatility of prices both. (4) yield tremendous profits and raise costs

    		•
  • Q : Free rider problem Question: Explain

    Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good. Answer:

    		•
  • Q : Writ short note on the income of

    Writ short note on the income of functional distribution?

    		•
  • Q : Describe unequal burdens of

    Describe unequal burdens of unemployment exist?

    		•
  • Q : Principle of comparative advantage When

    When Gene can make three pairs of cowboy boots per week or one saddle whereas Roy can make either two pairs of boots or two saddles, Gene will form boots whereas Roy makes saddles according to the: (i) Law of Occam’s Razor. (ii) Principle of comparative advantag

    		•
  • Q : Cost of debt and Equity Cost of debt =

    Cost of debt= (1-tax rate)* interest rate * (debt ÷capital employed)Cost of equity = risk free rate + market premium (equity shareholders funds÷ capital employed)

    		•