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Why would policymakers choose to impose a price ceiling

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Instruction: Please answer ALL questions. All questions carry equal marks. Please do not write over 2000 words for the entire assignment.

1. a. Using the graph shown, analyze the effect a $300 price ceiling would have on the market for ten-speed bicycles. Would this be a binding price ceiling?

b. Using the graph shown, analyze the effect a $700 price floor would have on this market for ten-speed bicycles. Would this be a binding price floor?

c. Why would policymakers choose to impose a price ceiling or price floor?

830_graph.jpg

2. Bob Edwards owns a business. Bob hires an economist who assesses the shape of the business's average total cost (ATC) curve as a function of the number of units produced. The results indicate a U-shaped average total cost curve. Bob's economist explains what makes the ATC U-shaped. Explain the reasons as to why ATC is U-shaped. You are required to use practical reasons related to any business that you are familiar with in explanations.

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This assignment is about the price controls imposed by the government and policy makers on the ten-speed bicycles market. This talks about the binding price ceiling and binding price floor for the market for bicycles and which one would be effective. The second question is about the average total costs and why it is U shaped in the short run and in the long run.

Reference no: EM131334036

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Reviews

inf1334036

1/2/2017 5:26:51 AM

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inf1334036

1/2/2017 5:22:34 AM

please state the deadweight loss and surplus/deficit number in part 1a & 1b please use "practical reasons related to any business you are familiar with in explanation" as stated in part 2

len1334036

12/30/2016 1:22:41 AM

Please answer ALL questions. All questions carry equal marks. Please do not write over 2000 words for the entire assignment. Explain the reasons as to why ATC is U-shaped. You are required to use practical reasons related to any business that you are familiar with in explanations.

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