Assignment:
All of your answers should be either in bold or a color to make them stand out from the questions.
1. Rent control is a form of government imposed price controls. How can rent control distort the market for apartments? Be sure to explain rent control by using your understanding of price ceilings and price floors.
2. When will a price ceiling have no impact on the market?
3. Government imposed minimum wages are another form of price controls. How do minimum wages distort the market for wages?
4. When the government imposes a tax on a good, what happens to the quantity of the good sold and to the size of the market?
5. What is tax incidence?
6. How does the elasticity of supply and demand affect tax incidence?
7. What happens to producer and consumer surplus when the sale of a good or service is taxed?
8. How does the tax revenue raised compare to the change in consumer and producer surplus in question 6 above?
9. What happens to the deadweight loss and tax revenue when a tax is increased?
10. The Laffer curve demonstrates that in some circumstances a reduction in tax can actually produce more government tax revenue (true/false)?
11. If an equal tax is imposed on two products, one with very inelastic supply and demand and one with very elastic supply and demand, which will have the greatest deadweight loss?