Chapter 6 Homework Answer Keys

Chapter 6 Homework Answer Keys - from S 1 to S 2 . The...

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1 Chapter 6 Homework Answer Keys 3. a. The equilibrium price of Frisbees is $8 and the equilibrium quantity is six million Frisbees. b. With a price floor of $10, the new market price is $10 because the price floor is binding. At that price, only two million Frisbees are sold, because that is the quantity demanded. c. If there s a price ceiling of $9, it has no effect, because the market equilibrium price is $8, which is below the ceiling. So the market price is $8 and the quantity sold is six million Frisbees. 9. a. Figure 1 shows the effect of a tax on gun buyers. The tax reduces the demand for guns from D 1 to D 2 . The result is a rise in the price buyers pay for guns from P 1 to P 2 , and a decline in the quantity of guns from Q 1 to Q 2 . Figure 1 b. Figure 2 shows the effect of a tax on gun sellers. The tax reduces the supply of guns
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Unformatted text preview: from S 1 to S 2 . The result is a rise in the price buyers pay for guns from P 1 to P 2 , and a decline in the quantity of guns from Q 1 to Q 2 . 2 Figure 2 c. Figure 3 shows the effect of a binding price floor on guns. The increase in price from P 1 to P f leads to a decline in the quantity of guns from Q 1 to Q 2 . There is excess supply in the market for guns, because the quantity supplied ( Q 3 ) exceeds the quantity demanded ( Q 2 ) at the price P f . Figure 3 d. Figure 4 shows the effect of a tax on ammunition. The tax on ammunition reduces the demand for guns from D 1 to D 2 , because ammunition and guns are complements. The result is a decline in the price of guns from P 1 to P 2 , and a decline in the quantity of guns from Q 1 to Q 2 . 3 Figure 4...
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Chapter 6 Homework Answer Keys - from S 1 to S 2 . The...

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