Reference no: EM132478940

The market for college hockey players is characterized by the following supply and demand curves, where Q is the number of athletes and P is the weekly wage in excess of their college scholarship payments:

QD = 1,600 - 20P QS = 30P - 900

a. Suppose there is a completely free market. What is the equilibrium weekly wage? How many athletes are hired?

b. Now suppose that the National Collegiate Athletic Association (NCAA) steps in and decide to crack down on payments to players. The NCAA is bothered not by the existence of these payments, but by their level, so the NCAA restricts players to be paid no more than $35/week above the scholarship payment. How many athletes are now hired?

c. What is the change in producer surplus as a result of the price control?

d. How much do schools now spend on players in comparison to the free market equilibrium?

e. What is the dead weight loss of the price ceiling?

Public Policy Analysis The Washington, D.C., police bought more than 6,000 guns, no questions asked, in gun buyback programs in 1999 and 2000. Millions of dollars have been spent in similar programs in many cities including NYC. The theory of gun buybacks is that: buybacks reduce guns in circulation and fewer guns in circulation reduce crime. Do gun buyback programs make good policies? (Hints: What condition of guns are likely to be offered at buybacks? What might be the elasticity of S? What are the S and D curves initially and with buyback programs? What happens to P and Q initially and with buyback programs?)