#2 a little unsure

*Pressure on Prices fill in the blank (Upward/Downward)

*Assuming paragraph fill in the blank

(Shortage/Surplus) (Smaller/Larger)

2. Price controls in the Florida orange market The following graph shows the annual market for Florida oranges, which are sold in units of 90pound boxes. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white eld, the graph and any corresponding amounts in each grey eld will change accordingly. PRICE (Dollars per box) 50 45 40 35 30 25 20 15 10 50 BB 120 150 180 21D 240 270 300 QUANTITY (Millions of boxes) Graph Input Tool Market for Florida Oranges I Price ( Dollars per box) Quantity Dema nded (Millions of boxes) 174 Quantity Supplied ( Millions of boxes) 126 In this market, the equilibrium price is per box, and the equilibrium quantity of oranges is S million boxes. For each of the prices listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls. Price Quantity Demanded Quantity Supplied ( Dollars per box) ( Millions of boxes) (Millions of boxes) Pressure on Prices 35 120 180 V .5 _v True or False: A price ceiling below $25 per box is not a binding price ceiling in this market. 0 True 0 False Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the longrun supply of oranges is much more price sensitive than the shortrun supply of oranges. Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a V that is V in the long run than in the short run. 4. Minimum wage legislation The following graph shows the labor market in the fastfood industry in the ctional town of Supersize City. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white eld, the graph and any corresponding amounts in each grey eld will change accordingly. Graph Input Tool ('2) 20 Market for Labor in the Fast Food Industry 18 / I Wage 16 SUPPI (Dollars per hour) 3' 1: Labor Demanded Labor Su lied 3 14 (Thousands of 560 (Thousandpspnf 240 E workers) workers) 0 12 0. {Eu 10 - - - - - - I E E a {'5' 6 a: E 4 2 0 0 80 160 240 320 400 480 560 640 720 800 LABOR (Thousands 01 workers) In this market, the equilibrium hourly wage is , and the equilibrium quantity of labor is thousand workers. Suppose a senator introduces a bill to legislate a minimum hourly wage of $3. This type of price control is called a price floor V . For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls. Wage Labor Demanded Labor Supplied ( Dollars per hour) ( Thousands of workers) (Thousands of workers) Pressure on Wages 14 240 Downward V 6 560 240 Upward V True or False: A minimum wage above $10 per hour is a binding minimum wage in this market. True 0 False 6. Who should pay the tax? The following graph shows the labor market for research assistants in the fictional country of Collegia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 250. Suppose the government has decided to institute a $4-perhour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers eld (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers eld (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white eld, the graph and any corresponding amounts in each grey eld will change accordingly. 20 1B 15 14 12 10 WAGE (Dollars per hour) Supply Demand n 50 100 150 2:30 250 30c: 350 40:3 450 50c: LABOR (Number of workers) Graph Input Tool Market for Research Assistants I Wage (Do lars per hour) Labor Demanded ( Number of workers) E 625 Labor Supfplied ( Number 0 workers) Demand Shifter Tax Levied on Employers ( Dollars per hour) E Supply Shifter Tax Levied on Workers ( Dollars per hour) E For each of the proposals, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amount paid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by research assistants ( that is, the wage received by workers minus any taxes collected from the workers). After-Tax Wage Paid by After-Tax Wage Received by Tax Proposal Quantity Hired Employers Workers Levied on Levied on (Number of ( Dollars per hour) ( Dollars per hour) Employers Workers workers) ( Dollars per hour) (Dollars per hour) 4 0 E E E o 4 S S S 2 2 S E E Suppose the government is concerned that research assistants already make too little money and, therefore, wants to minimize the share of the tax paid by employees. of the three tax proposals, which is best for accomplishing this goal? 0 The proposal in which the entire tax is collected from workers 0 The proposal in which the tax is collected from each side evenly O The proposal in which the tax is collected from employers 0 None of the proposals is better than the others