week3_ps - Principles of Economics Problem Set for Week 3...

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Principles of Economics Problem Set for Week 3 Due: online 10pm Mar.16, Tuesday I. Choose one answer that fits the best. (4 points each for questions 1-15, total 60 points) 1. Price controls are a. used to make markets more efficient. b. usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. nearly always effective in eliminating inequities. d. established by firms with monopoly power. 2. Assume that the demand and supply curves for cars are elastic. If the government imposed a $500 tax on the buyer of each car, we can assume that the a. equilibrium price of a car would decrease by less than $500. b. price of a car would decrease by exactly $500. c. price of a car would decrease by more than $500. d. price of a car would not change if both curves were elastic. 3. Suppose that the demand for macaroni is price inelastic and the supply of macaroni is price elastic, and that the demand for cigarettes is price inelastic and the supply of cigarettes is price elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the a. sellers of both goods would pay most of the tax. b. buyers of both goods would pay most of the tax. c. sellers of cigarettes and the buyers of macaroni would pay most of the tax. d. We could not be sure who would actually pay most of the tax. 4. One economist has argued that rent control is “the best way to destroy a city, other than bombing.” Why would an economist say this? a. He fears that low rents will cause low-income people to move into the city, reducing the quality of life
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week3_ps - Principles of Economics Problem Set for Week 3...

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