Question

1 What is the GOVERNMENT FAILURE for some workers resulting from this legislation, i.e. which workers end up being WORSE off as a result of this legislation? Use a carefully labeled graph, and assuming any logical numbers, to support your answer to the question above.

2   Some government officials decide it is a market failure that the price of renting an apartment is too high for some people. The government then passes legislation INTENDED to help those wanting to rent apartments. What is the GOVERNMENT FAILURE for some people resulting from this legislation, i.e. which people end up being WORSE off that were intended to be better off as a result of this legislation? Use a carefully labeled graph, and assuming any logical numbers, to support your answer.

3 Assume there is a significant negative externality in supplying a good or service. Using a carefully labeled graph, show the supply curve that does NOT reflect the negative externalities and the supply curve that does reflect these externalities. Make sure each is carefully labeled.

4 Explain, using a carefully labeled graph, why the price of oil has PLUMMETED recently. EXPLAIN the movement from one equilibrium to another.

5 Assume the President of the United States states “we will no longer put much resources into enforcing our immigration laws.” Explain how the predictable increase in illegal immigration will harm some American low-skilled workers. Use a carefully labeled graph to support your answer. Besides the illegal immigrants and employers benefitting, who else benefits from illegal immigration?

6 GDP in the year 2010 was $300,000,000,000 when the population was 10,000,000. GDP in 2020 in that same country was $550,000,000,000 and the population was 12,000,000. Calculate the annual growth rate in GDP PER CAPITA. Show your math.

7 Using a carefully labeled graph, show and explain how licensing requirements can harm CONSUMERS.

8A basket of goods and services cost $200 in the year 2000. That same basket of goods costs $438.22. What has been the annual inflation rate? SHOW YOUR MATH.

Answer 1

Question 2 answered as it is a complete question.

When government intervenes in the market then it may do it in two ways of price controls. Price ceiling or price flooring.This may lead to market failure if resource allocation is not optimal.

Price ceiling: price ceiling is maximum legal price that can be charged by the sellers. When govt. believes that market prices are to high the it applies ceiling. For. ex. Rents in a certain city may be very high then govt. may fix maximum rent that can be charged. Other examples can be a certain medicine maximum price determination.

Economic impact can be shown as below:When market had a equilibrium price P*, govt. thought it was too high and hence price ceiling at price Pc is put. Now at price Pc demand is D and supply is only S, hence there is shortage of goods.

Initial equilibrium is disturbed. Consumers will be better off in terms of price but will have to face shortage. Quality of goods may down and parallel markets may flourish.Producers are worse off and society as a whole is also worse off due to misallocation of resources.