Suppose the Berkeley city government has been using a binding price ceiling (rent control) to help renters deal with the high price of Bay Area housing. （a）Show how the city could instead use a per-unit subsidy physically paid to landlords (the suppliers of rental housing) to bring about the same low price for rental housing for buyers as the price ceiling. b) Would such a subsidy cause a deadweight loss? Would it cause a misallocation of either consumption or production? (Note: You do not need to discuss the deadweight loss associated with a price ceiling—just any deadweight loss associated with the subsidy.)

Suppose the Berkeley city government has been using a binding price ceiling (rent control) to help renters deal with the high price of Bay Area housing. （a）Show how the city could instead use a per-unit subsidy physically paid to landlords (the suppliers of rental housing) to bring about the same low price for rental housing for buyers as the price ceiling. b) Would such a subsidy cause a deadweight loss? Would it cause a misallocation of either consumption or production? (Note: You do not need to discuss the deadweight loss associated with a price ceiling—just any deadweight loss associated with the subsidy.)

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 14SQ

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Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption. If the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. Explain how will this impact the revenues for sugar growers, rum producers and whiskey producers?
Suppose that the world price of oil is $70 per barrel and that the United States can buy all the oil it wants at this price. Suppose also that the demand and supply schedules for oil in the United States are as follows: Price ($ per Barrel) 55 60 65 70 75 U.S. Quantity Demanded 26 24 22 20 18 U.S. Quantity Supplied 14 16 18 20 22 Now suppose that the United States allows no oil imports. The equilibrium price in the United states is $ 70 per barrel and the equilibrium quantity is 20 million barrels. If the United States imposed a price ceiling of $70 per barrel on the oil market and prohibited imports, there would be a of million barrels of oil.
1. Suppose the demand for and supply of one-bedroom housing units in Nairobi’s Westlands area can be represented by the following linear functions:Qd =18,200–40P and Qs =–2,200+20PWhere Qd, Qs = Number of housing units in thousands, P = Price in US dollars.a) Determine the market equilibrium price and quantity b) Suppose the government decides to subsidize the cost of construction one-bedroom houses in the area at US$20.00 per housing unit. Determine the equilibrium outcome after the subsidy, and show how the benefit is shared between tenants and landlords. How much will the subsidy costthe government?c) Graphically show your results using well labeled demand and supply curves
13. Given that the U.S. government mandates the use of ethanol as a partial substitute for gasoline (10% by volume), and that ethanol manufactured in the U.S. is made from corn; how will the supply of ethanol, the demand for ethanol, as well as its equilibrium price and quantity, be affected by the following event: The negotiation of a trade agreement with Brazil that allows importation of Brazilian ethanol produced from sugar cane. May be multiple answers f) Equilibrium Quantity will increase. h) Equilibrium Price will increase. j) Equilibrium Price and Quantity will remain unchanged. d) Supply will increase. g) Equilibrium Quantity will decrease. e) Supply will decrease. i) Equilibrium Price will decrease. c) Demand will decrease. b) Demand will increase. a) To the extent the amount of ethanol additive in gasoline is determined by government fiat, neither demand for not supply of…
PLEASE ANSWER AND EXPLAIN NUMBER 2 AND 3Suppose that the world demand and supply elasticities of crude oil are -0.906 and 0.515, respectively. The current equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year. Derive the linear demand and supply equations. Now suppose the world supply curve you derived above consists of competitive supply and OPEC supply. If the competitive supply equation is: SC = 7.78 + 0.29P, what must be OPEC's level of production in this equilibrium? Now suppose social and political unrest in some non-OPEC producing countries reduced the competitive supply by 30 percent, what happens to the world price of crude oil?
The market for tomatoes is competitive and characterized by a demand function of the form QD = 60000 - 4000p and a supply function of the form Qs = 6000p -30000, where quantity is measured in kilograms and p is the price per kilogram. %3D Suppose the government starts to charge sales tax on tomatoes. The tax is at 5% for every dollar a consumer spends on on tomatoes. 1. Calculate the equilibrium prices and quantity under the value tax 2. Calculate the government tax revenue, and the deadweight loss of the tax.
Suppose that the United States and the European Union impose a price ceiling on crude oil of $25 per barrel. Explain, and illustrate graphically, how this would affect the markets for crude oil and for gasoline in the United States and in the European Union.
Given- Qd=1000−25pQs=−200+5p A)What is the equilibrium price and quantity B)Graph these functions. Show where equilibrium price and quantity are. Show x and y intercepts C)What is the new equilibrium price if there is 5 peso tax per unit? D)What is the new equilibrium if there is a 3 peso subsidy per unit? (no tax applied here) E)Explain the welfare effects of taxes and subsidies based on equilibrium quantities and prices.
Suppose that the world price of oil is $70 per barrel and that the United States can buy all the oil it wants at this price. Suppose also that the demand and supply schedules for oil in the United States are as follows: U.S. Quantity Demanded U.S. Quantity Supplied 26 14 24 16 22 18 20 20 18 22 Price ($ per Barrel) 55 60 65 70 75 Now suppose that the United States allows no oil imports. The equilibrium price in the United states is $ per barrel and the equilibrium quantity is million barrels. If the United States imposed a price ceiling of $55 per barrel on the oil market and prohibited imports, there would be an If the price ceiling is below $70, quantity supplied and quantity demanded differ. will determine how much oil is purchased. of million barrels of oil.
In recent years, the government of Pakistan has established a support price for wheat of about $0.20 per kilogram of wheat. At this price, consumers are willing to purchase 10 billion kilograms of wheat per year, while Pakistani farmers are willing to grow and harvest 18 billion kilograms of wheat per year. The government purchases and stores all surplus wheat. Suppose that the market-clearing price of Pakistani wheat in the absence of price supports is equal to $0.10 per kilogram. At this price, the quantity of wheat demanded is 12 billion kilograms. Under the government wheat price-support program, how much more is spent each year on wheat harvested in Pakistan than otherwise would have been spent in an unregulated market for Pakistani wheat?
Refer to Example 2.10, which analyzes the effects of price controls on natural gas. Recall that the free-market wholesale price of natural gas (PG) is $6.40 per mcf (thousand cubic feet), the average price of crude oil (Po) is $50 per barrel, and production and consumption of gas (Q) are 23 Tcf (trillion cubic feet). Suppose the price elasticity of supply of natural gas is 0.20, the cross-price elasticity of supply of natural gas with respect to the price of oil is 0.12, the price elasticity of demand for natural gas is -0.60, and the cross-price elasticity of demand for natural gas with respect to the price of oil is 1.25. If so, then the linear supply curve for natural gas is OA. Q=1.346-1.638PG +0.055PO B. Q=12.056+0.368PG -0.495PO- O C. Q=16.296 +0.495P + 1.638Po O D. Q=10.562 +1.066PG-0.327Po O E. Q=15.648+0.719P+0.055Po
Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world's sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption. (i)Discuss the effect on the markets for each of the three products if thegovernment implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers and whiskey producers?