1) Government intervenes in the free market by many different ways. For example, regulators may use price controls, impose taxes on consumers as well as on producers and give subsidies to producers. What would be the intended outcome in the market by each of the above government actions? Give a real-world example of how government intervention in the free market affects the demand for or supply of a product or service you use or a product or service produced at your workplace.
2) Under antitrust policies, the government breaks-up some dominant firms, prevents corporate mergers, and regulates some business practices that reduce competition. What are the major antitrust laws in the United States? Discusses several major antitrust cases in the United States. Discuss how the US economy will likely differ today if AT&T had not been broken-up. How do these laws affect (or affected) your work place or products used at your work place?
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1) Government intervenes in the free market by many different ways. For example, regulators may use price controls, impose taxes on consumers as well as on producers and give subsidies to producers. What would be the intended outcome in the market by each of the above government actions?
Regulators impose price controls in several different situations. the minimum wage is in effect a price control. A policy establishing a price floor below which the price of labor is not allowed to fall. The intended outcome is of course to encourage a livable wage for labor. Some often cited consequences mention that increasing minimum wage increases unemployment rates since a price floor creates a surplus (i.e. surplus of labor). Other examples include rent control and in the utility sector regulatory boards work with investor owned utilities to establish rates for electricity.
An example of taxes imposed on consumers or producers is the gas tax or cigarette and liquor taxes. In many cases it does not matter whether the consumer is taxed or the producer. The elasticities of the demand and supply curves will for the most part determine which group, consumers or producers, bears the burden of the tax. For example if demand is relatively inelastic as with cigarettes and gas then even if the producers pay the tax, they can ...
This solution helps answer discussion questions on supply and demand.