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ECON 220 MICROECONOMICS
Ch. 6 – Supply, Demand, and Government Policies
TEAM ASSIGNMENTS
PROBLEMS AND APPLICATIONS pp. 132 – 133, #s 3, 7, 8, 10, and 14
3. A recent study found that the demand and supply schedules foe Frisbees are as follows:
Price perFrisbee | QuantityDemanded million | QuantitySupplied million |
$11 | 1 | 15 |
10 | 2 | 12 |
9 | 4 | 9 |
8 | 6 | 6 |
7 | 8 | 3 |
6 | 10 | 1 |
a. What are the equilibrium price and quantity of Frisbees?
The equilibrium price of the Frisbees is $8.00 and the quantity is 6.
b. Frisbee manufacturers persuade the government that Frisbee production improves scientist’ understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a floor $2 above the equilibrium price.
i. What is the new market price?
The new market price will be $10.00
ii. How many Frisbees are sold?
The amount of the Frisbee’s supplied was 12 million but the demand was 2 million which resulted in a surplus.
b. Irate college students march on Washington and demand a reduction in the price of Frisbees. An even more concerned Congress votes to repeal the floor and impose a price ceiling below the former price floor. How many Frisbees were sold?
The new price would be $9.00 so the demand would be 4 million.
6. Congress and the President decide that the United States should reduce air pollution by reducing the use of gasoline. They impose a $0.50 tax for each gallon of gasoline sold.
a. Should they impose this tax on producers or consumers? Explain using a supply and demand diagram.
The outcome will be the same if the taxes are imposed on either the producer or consumer. Since the price of a good or service is important to the consumer then I would impose the tax with the producer. This...