Chapter 7, Government Actions in Markets Video Solutions, Essential Foundations of Economics

Problem 1

In Florida, sunscreen and sunglasses are vital items. If the tax on sellers of these items is doubled from 5.5 percent to 11 percent, who will pay most of the tax increase: the buyer or the seller? Will the tax increase halve the quantity of sunscreen and sunglasses bought?

Rachel Lepak

Numerade Educator

00:52

Problem 2

Suppose that the government imposes a $\$ 2$ a cup tax on coffee. What determines by how much Starbucks will raise its price? How will the quantity of coffee bought in coffee shops change? Will this tax raise much revenue?

Rachel Lepak

Numerade Educator

01:43

Problem 3

Table 1 illustrates the market for Internet service. What is the market price of Internet service? If the government taxes Internet service $\$ 15$ a month, what is the price the buyer pays? What is the price the seller receives? Does the buyer or the seller pay more of the tax?

Breanna Ollech

Numerade Educator

04:17

Problem 4

Use Figure 1, which shows the demand for on-campus housing, to work Problems 4 to 6 . The college has 200 rooms to rent.
If the college puts a rent ceiling on rooms of $\$ 650$ a month, what is the rent, how many rooms are rented, and is the on-campus housing market efficient?

Christian Le Doux

Numerade Educator

02:17

Problem 5

Use Figure 1, which shows the demand for on-campus housing, to work Problems 4 to 6 . The college has 200 rooms to rent.
If the college puts a strictly enforced rent ceiling on rooms of $\$ 550$ a month, what is the rent, how many rooms are rented, and is the on-campus housing market efficient? Explain why or why not.

Christian Le Doux

Numerade Educator

02:17

Problem 6

Use Figure 1, which shows the demand for on-campus housing, to work Problems 4 to 6 . The college has 200 rooms to rent.
Suppose that with a strictly enforced rent ceiling on rooms of $\$ 550$ a month, a black market develops. How high could the black market rent be and would the on-campus housing market be fair? Explain your answer.

Christian Le Doux

Numerade Educator

05:05

Problem 7

Table 2 shows the demand and supply schedules for student workers at oncampus venues. If the college introduces a strictly enforced minimum wage of $\$ 11.50$ an hour, who gains and who loses from the minimum wage, and is the campus labor market efficient or fair?

Yi Chun Lin

Washington University in St Louis

02:45

Problem 8

Table 3 shows the demand and supply schedules for mushrooms. Suppose that the government introduces a support price for mushrooms of $\$ 6$ per pound. Who gains and who loses? What are the quantity of mushrooms produced, the surplus of mushrooms, and the deadweight loss?

Christian Le Doux

Numerade Educator

00:55

Problem 9

Use the following news clip to work Problems $\mathbf{9}$ and $\mathbf{1 0 .}$
Coal shortage at China plants
The government of China has set price controls on coal and gasoline in an attempt to shield families and farmers from rising world energy prices. Chinese power plants have run short of coal, sales of luxury, gas-guzzling cars have increased, and gasoline consumption has risen.
Are China's price controls price floors or price ceilings? Draw a graph to illustrate the shortages of coal and gasoline created by the price controls.

Alejandro Ruiz

Numerade Educator

03:42

Problem 10

Use the following news clip to work Problems $\mathbf{9}$ and $\mathbf{1 0 .}$
Coal shortage at China plants
The government of China has set price controls on coal and gasoline in an attempt to shield families and farmers from rising world energy prices. Chinese power plants have run short of coal, sales of luxury, gas-guzzling cars have increased, and gasoline consumption has risen.
Explain how China's price controls have changed consumer surplus, producer surplus, total surplus, and the deadweight loss in the markets for coal and gasoline. Draw a graph to illustrate your answer.

Karan Sood

Numerade Educator

01:52

Problem 11

Read Eye on Price Regulation on p. 223 and explain why a mismatch between intention and outcome is inevitable if a price regulation seeks to block the laws of supply and demand.

Kaylee Mcclellan

Numerade Educator