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Unformatted text preview: abeling the price ceiling Pc.
(ii) Does this price ceiling increase, decrease, or have no impact on the deadweight loss in this industry?
(c) Assume that instead of the price ceiling, the government grants each student a subsidy for each unit of
college education purchased. Will the new equilibrium quantity of college education purchased be greater
than, less than, or equal to Qm from part (a) ? © 2011 The College Board.
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-3- 2011 AP® MICROECONOMICS FREE-RESPONSE QUESTIONS (Form B) 3. Woodland is a small town in which everyone works for TreeMart, the local lumber company. TreeMart is
a monopsonist in the labor market and a perfect competitor in the lumber market. In the short run, labor
is the only variable input. The labor market for TreeMart is given in the graph above.
(a) Identify the profit-maximizing quantity of labor for TreeMart.
(b) Identify the wage rate TreeMart pays to hire the profit-maximizing quantity of labor.
(c) Identify the quantity of labor hired in each of the following situations.
(i) TreeMart operates in a competitive labor market.
(ii) The government imposes a minimum wage of $12.5. Explain. STOP
END OF EXAM © 2011 The College Board.
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This note was uploaded on 02/03/2014 for the course ECONOMIC 112 taught by Professor Van le during the Fall '12 term at American Internation College.
- Fall '12
- van le