S.
Klepper, Economics
73-100, Fall 2008
In order to increase the number of new homes for sale, the government is considering building one million new homes and offering them for sale at the market price (i.e., the government is willing to sell the homes at whatever price is paid for new homes). Suppose the government executes its plan.
Which
of the following statements concerning the effects of the plan in the short
run are correct? Mark true for a
correct answer and false for an incorrect one and provide explanations for
each of your answers.
_____1. The market demand curve for new homes will shift to the right.
_____2. The total quantity supplied at each price (by private sellers and the government) will increase by one million homes.
_____3. Private
producers of new homes will sell one million less new homes.
_____4. The total quantity of new homes sold will increase by less than one million.
_____5. The total revenues of
private producers will decline.