S.
Klepper, Economics
73-100, Fall 2009
Consider
the market for new homes in the United States.
Suppose that the government undertakes a program in which it pledges to
build 20% as many new homes as are supplied by private producers of new homes. Assume that the market for new homes was in
long-run equilibrium prior to the government program.
Which
of the following statements concerning the effects of this plan in the long 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 the right.
_____2. The total quantity of new homes purchased by buyers will rise.
_____3. The price of new homes will fall.
_____4. The number of new homes sold by private producers will decline.
_____5. The total revenues of private producers of new homes will decrease.