Name: ______________________________________________________________Price ControlsTaxesHomework – Week 4Name: ______________________________________________________________TA Session (Day and time): _______________________________________________Price Controls 1) Let’s analyze the taxi market in San Francisco. When the supply is from traditional cabs there is a price ceiling Pc. When the supply is from ride sharing apps like Uber there are no price controls. A) Assume the equilibrium price is below Pc. Draw the demand and supply curves, and market equilibrium price and quantity for both cases, when the supply is from traditional cabs and whenit is from Uber. Draw two separate graphs, one for each case, and compare the two. (Assume Uber and Taxi have equal cost curves.)B) One weekend there is a big music festival at Golden Gate Park. Draw the new equilibrium graphs assuming that the market equilibrium is going to be above Pc. Compare the case of traditional cabs vs Uber.2) Lovers of classical music persuade the Congress to impose a price ceiling of $40 per concert ticket. Foreach of the equilibrium prices listed in the following table, indicate (with an X) whether a price ceiling of $40 will cause more, fewer, or the same amount of people to attend music concerts than if there is no price control (assume there is no black market for expensive concerts).Result of Price Ceiling on Concert AttendanceEquilibrium Price More Same Fewer$30$40$503) For the following questions, circle the correct answer.A) When the government imposes a binding price floor, it causes:a) the supply curve to shift to the left.b) the demand curve to shift to the right.c) a shortage of the good to develop.d) a surplus of the good to develop. B) In a market with a binding price ceiling, an increase in the ceiling will ____ the quantity supplied, ____ the quantity demanded, and reduce the ____ .a) increase, decrease, surplusb) decrease, increase, surplusc) increase, decrease, shortaged) decrease, increase, shortageTaxes 1) The Portuguese government needs to increase revenue to pay the debtors and decides to raise a tax T per car sold in Portugal, paid by producers. The demand for cars in Portugal is inelastic because consumers don’t have many transportation options, while supply is elastic because producers can sell across the entire European Union.A) In a graph show the equilibrium without taxes and the new equilibrium with tax T. Compare the quantities and the prices paid by consumer and producer. B) Who shares more of the tax burden? And why is that the case?C) How would your answer to A) and B) change if the tax was paid by consumers instead of producers? Explain your reasoning.2) Congress and the President decide to impose a tax of $0.50 per gallon on gasoline sold.A) Who should they impose this tax on?a) Consumersb) Producersc) It doesn’t matterB) True or False: Consumers of gasoline are hurt by this tax.a) Trueb) False3) For the following questions, circle the correct answer.A) Which of the following would increase quantity supplied, increase quantity demanded, and decrease the price that consumers pay?a) The imposition of a binding price floor.b) The removal of a binding price floor.c) The passage of a tax levied on producers.d) The repeal of a tax levied on producers.B) When a good is taxed, the burden of the tax falls mainly on consumers if:a) the tax is levied on consumers.b) the tax is levied on producers.c) supply is inelastic and demand is elastic.d) supply is elastic and demand is