ECON 101 Final Review Package

ECON 101 Final Review Package - Economics Exam Review...

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Economics Exam Review Chapters 6, 13 – 17 Chapter 6 A price ceiling or price cap is a regulation that makes it illegal to charge a price higher than a specified level. When a price ceiling is applied to a housing market it is called a rent ceiling . (?) In real life, find some examples of price ceilings or price floors? What is the purpose that we have price ceilings or price floors? (?) In the graph above, is this an example of an effective price ceiling or an effective price floor? How can you tell? (?) Where is the region of shortage? Search Activity The time spent looking for someone with whom to do business is called search activity . (?) Identify in the graph above the black market price. (?) In the graph above, show the consumer surplus, the potential loss from housing search, the producer surplus, and the deadweight loss A price floor is a regulation that makes it illegal to trade at a price lower than a specified level.
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(?) In the graph above, show where the unemployment is, the firms’ surplus, the potential loss from job search, the deadweight loss, and the workers’ surplus. Taxes Activities Example: What you should know from this graph: With no tax, the equilibrium price is $3.00 a pack. A tax on sellers of $1.50 a pack is introduced. Supply decreases and the curve S + tax on sellers shows the new supply curve. The market price paid by buyers rises to $4.00 a pack and the quantity bought decreases. The price received by the sellers falls to $2.50 a pack. So with the tax of $1.50 a pack, buyers pay $1.00 a pack more and sellers receive 50¢ a pack less.
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Test your understanding: short answer! In the graph above, is the tax on the buyers or the sellers? What is the price paid and received by the buyers and sellers before the tax? What is the price paid by the buyers after the tax? What is received by the sellers after? How much does the government receive in tax revenue? Show calculations. - Perfectly inelastic demand: Buyer pay the entire tax. - Perfectly elastic demand: Sellers pay the entire tax. *Keep in mind this is when the sellers are taxed. (?) Does this make sense logically? (?) What would the two graphs for these two situations look like? (hint: all you have to do is look at the change in price. If there is no change in price, that means that the sellers absorb the tax, and if there is, that means that the buyers pay the tax because the sellers are able to create a large markup and push the taxes to the buyers!)
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In the graph above, show where the tax revenue is located and where there is a deadweight loss. What is quota and when does the government use it? A subsidy is a payment made by the government to a producer. If you were provided with the graph below, would you say that having a penalty on selling
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ECON 101 Final Review Package - Economics Exam Review...

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