price ceiling a legal maximum on the price at which a good can be sold price

Price ceiling a legal maximum on the price at which a

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price ceiling a legal maximum on the price at which a good can be sold price floor a legal minimum on the price at which a good can be sold tax incidence the manner in which the burden of a tax is shared among participants in a market 6-4c Questions For Review 1. Give an example of a price ceiling and an example of a price floor. 2.Which causes a shortage of a good—a price ceiling or a price floor? Justify your answer with a graph. 3.What mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium? 4.Explain why economists usually oppose controls on prices. 5.Suppose the government removes a tax on buyers of a good and levies a tax of the same size on sellers of the good. How does this change in tax policy affect the price that buyers pay sellers for this good, the amount buyers are out of pocket including the tax, the amount sellers receive net of the tax, and the quantity of the good sold? 6.How does a tax on a good affect the price paid by buyers, the price received by sellers, and the quantity sold? 7.What determines how the burden of a tax is divided between buyers and sellers? Why? 1.Lovers of classical music persuade Congress to impose a price ceiling of $40 per concert ticket. As a result of this policy, do more or fewer people attend classical music concerts? 2. The government has decided that the free-market price of cheese is too low. a. Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and- demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is  there a shortage or surplus of cheese? b. Farmers complain that the price floor has reduced their total revenue. Is this possible? Explain. c. In response to farmers' complaints, the government agrees to purchase all the surplus cheese at the  price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?
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3. A recent study found that the demand and supply schedules for Frisbees are as follows: a. What are the equilibrium price and quantity of Frisbees? b. Frisbee manufacturers persuade the government that Frisbee production improves scientists' understanding of  aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2  above the equilibrium price. What is the new market price? How many Frisbees are sold?
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