Liberty University ECON 213 InQuizitive chapter 6 complete solutions correct answers updated

Liberty University ECON 213 InQuizitive chapter 6 complete solutions correct answers updated

Identify some of the ways businesses will adapt to a minimum wage in the long run.

Price controls generally serve a positive economic function, as they compensate for the market’s inability to regulate wages in certain sectors of the economy.

Rent control is an ineffective way for local city governments to provide affordable housing to low-income residents.

Unlike price ceilings, price floors lead to very positive effects when properly implemented.

Suppose the government enacts a price floor on milk, which leads to a surplus in the market. How will the government then attempt to equalize supply and demand?

Fill in the blanks to complete the passage regarding the development of illegal markets in response to price ceilings.

If minimum wage laws are generally nonbinding and do not affect the equilibrium wage, then what is the purpose of implementing a minimum wage? It holds out the promise for low-income voters of a betterment in their situation. It leads employers to create better working conditions out of fear that a binding law may soon be imposed. It works to reduce the existing unemployment rate.

Suppose this graph shows the market for milk in California. If the California legislature imposes a price floor of $6 per gallon of milk, what price would the black market set for each gallon of milk illegally sold to consumers?

As illustrated here, a binding price ceiling causes a short-run shortage, which then worsens into a long-run shortage. What, in this particular scenario, happens to the black-market price between the short run and the long run? The black-market price stays more or less the same in the long run as in the short run. The black-market price goes down in the long run. The black-market price goes up in the long run, due to increased elasticity of supply.

Fill in the blanks to complete the passage regarding the government’s attempt to reduce a crop surplus that results from price controls.

The government’s attempt to – additional demand for agricultural products leads to complex and unintended consequences. The government will often – surplus agricultural production and sell it at a – price to developing countries rather than letting crops go to waste. People in these countries can then purchase the excess output from developed nations rather than goods from –.

What are some of the unintended effects of rent control? Rent-control laws incentivize the development of upscale housing instead of low-income units. Rent control decreases landlords’ profits and subsequently lower their incentive to invest in property upkeep. More low-income residents are able to find more housing in rent-controlled cities in the long term. Rent-controlled units have a high ownership turnover rate.

Let's assume that a state increases its minimum wage from $8 to $11.35, while the equilibrium wage remains at a constant $10. Click on the area of the graph representing the unemployment that sets in when the minimum wage is raised.

Identify the negative consequences of establishing a price floor on milk. There will be a decrease in the quantity of milk demanded. Sellers will be tempted to engage in illegal activity to recoup some of their costs due to milk that went unsold. There will be a surplus of milk. Consumers will demand higher-quality milk as they are forced to pay more.

If a ceiling on the price of bread leads to the disappearance of higher-quality, specialty bread from store shelves, which production decisions might this reflect? Production shifts to a use of cheaper ingredients. Marketing is no longer aimed at upscale consumption. Specialty bread is available only direct from the bakery, to avoid transportation costs. Customers are rapidly buying the limited number of loaves available.

Place the following events in the order they might occur once rent control is implemented in a crowded, impoverished neighborhood.

Suppose that prior to Hurricane Sandy, the market price for a generator in New Jersey was $530. After Sandy, the market price rose to $900, as shown in the graph. Click on the area of the graph that represents the resulting shortage if the government were to implement a $700 maximum price-gouging law for generators after the disaster of Hurricane Sandy.

Assuming that the equilibrium wage is $7 and the minimum wage is set at $10, how many workers will be unemployed in the long run?

How are the short-run consequences of price ceilings on bread magnified in the long run? In the long run, these products become increasingly harder to find. In the long run, bread consumers will choose substitutes to the expensive bread offered in the black market. In the long run, bread consumers will demand more of the bread offered in the black market, which will increase the illegal price for the good. In the long run, the price ceiling will no longer exist as the government is forced to abolish it.

If, with the demand and supply curves shown, the government implements a price ceiling of $0.50 per loaf, what is the size of the resulting shortage?

Fill in the blanks to complete the passage regarding a government's attempt to influence the market through price controls.

If the government attempts to help the disadvantaged by enacting a – on gasoline, it will result in unintended consequences. By the law of supply and demand, which says that a drop in price will increase the – while lowering the –, lowering the price of gas will lead to a – of the good.

In the aftermath of a hurricane, an entrepreneur buys generators at $530 each from a store in an area unaffected by the hurricane. He then sells them in the hardest-hit area for $900 apiece. What does the purchase of these generators by hurricane victims, at a 70% markup, say about the equilibrium price of generators following a natural disaster? The effect of price ceilings is to make behavior like the entrepreneur’s illegal. Those who voluntarily purchase the generators believe them to be worth the marked-up price. A shift in the demand curve will create a new equilibrium point. Any price ceiling imposed on generators in the affected area would create a surplus.

Why are price floors implemented by governments? Like price ceilings, they are a response to public perceptions of a burden on consumers. They are a response to political pressure from suppliers to keep prices high. They are a tool for keeping prices on certain goods competitive, to ensure that only consumers who genuinely value the product are able to obtain it. They are a tool used by governments to regulate their GDP.

Place the following effects of a long-run binding price ceiling in the order they will occur. Consumers see they can save on each unit, while producers realize they will earn less. Quantity demanded increases, while quantity supplied decreases. The market is at natural equilibrium where the supply and demand curves cross. The shortage becomes so acute that consumers will choose substitutes. A binding price ceiling is imposed, forcing the open-market price below the natural equilibrium point.

If the government imposes rent control under the circumstances shown, what is the resulting short-run shortage?

Which statement correctly describes the unemployment situation in South Africa? Unemployment is low due to absence of growth-limiting government regulations. Unemployment is high despite economic growth following the end of apartheid. Unemployment is high due to a collapse of the economy following the end of apartheid. Unemployment is low due to an economic boom following the end of apartheid.

Identify some ways in which, over the long run, workers adjust after a minimum wage law is enacted. Some retired workers re-enter the labor force. Some young people decide to work instead of attending school full-time. Workers leave the labor force due to too-low wages. Workers at the bottom of the pay scale move up to better-paying jobs.

Fill in the blanks to complete the passage regarding price floors and their relationship to supply and demand.

Price floors impose mandatory – prices for goods and services. When the price floors are binding, they set a – for a good or service than the one dictated by supply and demand, in order to encourage manufacturers to –. Another area in which legislators impose price floors is wages. This approach is reflected in – laws.

Suppose the government enacts a price ceiling on ice cream. Identify the various potential decisions made by ice cream producers to compensate for the price ceiling and maintain profits. discontinuing the production of fancier varieties. reducing the size of each carton of ice cream. lowering the quality of ice cream by using cheaper products. hiring additional workers at a lower wage in order to meet demand

Click on all the price ceilings that would be binding.

Match each type of price ceiling to its appropriate descriptions. The price ceiling does not influence the market. The price ceiling is below the equilibrium price. The price ceiling is above the equilibrium price. The price ceiling prevents supply and demand from clearing the market.

Place the following events in the order they will occur over the short run once a binding price control is imposed in the labor market.

For what purpose are price controls generally enacted in the United States? to alleviate public anxiety regarding perceived burdens on society, to demonstrate to other countries that the U.S. government has control over its economy, to alleviate tensions within Congress that arise during times of economic struggle, to ensure that annual business executive salaries are capped at a certain percentage of their total wealth

Fill in the blanks to complete the passage regarding the closure of a South African clothing factory and how it related to employment issues within the country.

The severe – crisis plaguing South Africa is reflected in the events surrounding the – of a clothing factory in the city of Newcastle. Once authorities arrived to close the factory due to a – violation, the female factory workers vehemently –, climbing on tables and cutting boards to express their anger. The unemployment rate was so high that these women would have rather been paid dismal wages than find themselves –.

Fill in the blanks to complete the passage regarding price gouging and the circumstances surrounding the laws that prevent it, and their effects.

Price gouging protections act as a – under normal market conditions. Price gouging laws typically go into effect following an emergency, usually –. These emergencies often cause an increase in the – of goods and services.

A state imposes a minimum wage of $10 per hour when the equilibrium price is $7. The resulting labor surplus is greater in the long run than in the short run: long-run unemployment (LR) is greater than short-run unemployment (SR). Why does this occur? The number of workers who would be available at the new wage is greater in the long run than the short run. The number of workers needed is smaller in the long run than the short run. The supply and demand curves have become more inelastic. The quantity supplied of labor has stopped exceeding the quantity demanded.

What form of illegal activity will take place in response to a shortage of milk caused by price controls? The government will create its own market to sell milk to consumers who cannot obtain it. Consumers will wait in long lines to obtain milk. Producers will create fancier milk offerings, such as fruit-flavored varieties, in order to incentivize consumers to remain loyal customers. Black markets will develop to provide consumers with what they want.

Fill in the blanks to complete the passage regarding the production of sugar and the influence of American price controls on the price of the good.

The story of American sugar production illustrates the real-world consequences of price controls. Various price supports have been implemented over the years to maintain – of domestic sugar. This has led U.S.-produced sugar to become two to three times – than the world price. The result is overproduction and waste as U.S. farmers are – to produce more sugar than is needed in regions that are not suited for growing the crop.

Suppose the equilibrium price for medicinal (isopropyl) alcohol is $7 per pint. What would be the lowest possible binding price floor on a pint?

If the government imposes rent control under the circumstances shown, what will be the resulting long-run shortage?

How has the international community sought to reduce the negative effects of price floors? International treaties ban the practice of dumping surplus production. The international community has banned price floors altogether. International coalitions have formed to alienate countries that engage in dumping. The international community has created a special court to try individuals who purchase surplus production from developed countries.

Place the following events in the order they will occur, starting with the implementation of a price floor for heating oil. The minimum price for heating oil is set at $6 per gallon, which is above the current equilibrium price. Refineries will produce more heating oil while consumers demand less. Producers will be stuck with unwanted heating oil. Producers will be tempted to offer illegal discounts on heating oil.

After a minimum-wage hike, unemployment is worse in the long run than in the short run.

Fill in the blanks to complete the passage regarding government price controls imposed during natural disasters.

If price does not have the ability to adjust when demand increases, there will be a – of the product. Devastated communities are – affected by price gouging legislation, as they must depend solely on the – of others and sluggish government action. –activity is no longer a way to mitigate poor conditions.