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Market Apparent program

For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gizmos. Consider the given programs of government intervention:

Program I: The govt. obliges an excise tax of $2 per gizmo
Program II: The govt. gives a subsidy of $2 per gizmo for gizmo producers.
Program III: The govt. obliges a price floor of $30.
Program IV: The govt. obliges a price ceiling of $20.
Program V: The govt. permits no more than 8,000 gizmos to be generated.

Beneath which of such programs will the market obvious? Explain briefly.

E

Expert

Verified

With the subsidy or excise tax, the market will obvious (that is, Programs I and II).

With the price floor (that is, Program III) there will be surplus supply, therefore the market will not apparent.

With the price ceiling (that is, Program IV) there will be surplus demand, therefore the market will not apparent.

With the production quota (that is, Program V) the price consumers pay will surpass $25, therefore there will be surplus supply. The market will not apparent.

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