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Chapter 4: Q. f (page 89)
Other things being equal, is the price of milk in Europe likely to rise or fall in response to the elimination of milk production quotas? Explain your answer.
Fall.
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There are simultaneous changes in the demand for and supply of global-positioning system (GPS) devices, with the consequences being an unambiguous increase in the market clearing price of these devices but no change in the equilibrium quantity. What changes in the demand for and supply of GPS devices could have generated these outcomes? Explain.
A city has decided to impose rent controls,and it
has established a rent ceiling below the previous
equilibrium rental rate for offices throughout
the city. How will the quantity of offices leased
by building, owners change?
Explain the effects of price floors and government-imposed quantity restrictions
Suppose that government places a ceiling on the price of a medical drug below the equilibrium price.
a. Show why there is a shortage of the medical drug at the new ceiling price.
b. Suppose that a black market for the medical drug arises, with pharmaceutical firms secretly selling the drug at higher prices. Illustrate the black market for this medical drug, including the implicit supply schedule, the ceiling price, the black market supply and demand, and the highest feasible black market price.
How might California cities alternatively have developed a rationing-by-queues approach using the internet?
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