Author Question: Suppose the government has declared beer to be an illegal substance and has imposed equal penalties ... (Read 91 times)

danielfitts88 · **on:** Jun 29, 2018

Suppose the government has declared beer to be an illegal substance and has imposed equal penalties on any person caught buying a beer and on any person caught selling a beer.

Using the above figure, in which CBL is the cost of breaking the law, what is the equilibrium price and quantity with this new law in effect? A) 5 per quart and 300 quarts of beer
B) 3 per quart and 500 quarts of beer
C) 3 per quart and 100 quarts of beer
D) 1 per quart and 300 quarts of beer

Question 2

With respect to labor supply, the substitution effect means a

A) person increases his or her hours of labor in response to a higher wage rate.
B) person decreases his or her hours of labor in response to a higher wage rate.
C) person substitutes high paying work for low paying work.
D) firm substitutes capital for labor.