Your answer should include a thorough response indicating a complete answer to the question with any examples that would further explain the answer.
1. Why does nearly every purchase you make provide you with consumer surplus?
2. Use either the word elastic or inelastic to complete the following sentences:
a. Deadweight loss with taxes is greater when demand is __________.
b. The amount of surplus transferred from producers to consumers with a price ceiling is greater when supply is __________.
c. Producers are willing to spend more to lobby government's support for a price floor, or to restrict supply, when demand is __________.
d. Rent controls cause more damage in the long run because, compared to the short-run supply of rental housing, long-run supply is
more __________.
e. Luxury taxes do not really hurt buyers of luxuries, because demand for luxuries is __________.
3. State three reasons for a potentially beneficial role of government intervention.
4. Which is more efficient: a market incentive program or a direct regulatory program? Why?