Why would policymakers choose to impose a price ceiling

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Reference no: EM131714933

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?

620_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.

Verified Expert

Three questions are solved. One of them is on price ceiling. The other on price floor. The third one on average total cost curve and its shape. Answers have been given with relevant examples. Different aspects of price ceiling and price floor have been clearly explained with relevant examples. Why the average total cost curve is U-shaped has also been explained?

Reference no: EM131714933

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4/3/2018 4:46:53 AM

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