ECON 4

What effect over the last decade, has the increasingly efficient and inexpensive technology of online college courses had on the college textbook market?

The demand for physical textbooks have steadily decreased, and as a result more publishing companies are having less demand for high skilled textbook editor jobs.

The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the demand and supply for labor are given in the graph, there will be

a surplus of 6 workers. At a wage of $9, the quantity demanded is 3 units while the quantity supplied is 9 units, therefore there is a surplus of 6 workers.

deadweight loss

the total loss of producer and consumer surplus from underproduction or overproduction

Refer to the figure below. If the government sets a price ceiling of $4, there would be a(n):

shortage of 10 units

Refer to the figure below. If the government sets a price ceiling at $20, there would be a(n):

shortage of 20 units. A shortage of 20 units would exist (30-10=20) (quantity demanded at a price of $20 - quantity supplied at a price of $20).

A government decides to set a price ceiling on bread of $2.40 so that bread is affordable to the poor. The conditions of demand and supply are given in the table below. What will be the price and quantity of bread purchased?

$2.40; 6,400

Refer to the figure below. If the government set a price ceiling of $80, the amount bought and sold will be:

20. The price ceiling of $80 is above the natural market equilibrium and is therefore not binding which means it doesn't prevent the market from reaching its natural equilibrium. The equilibrium quantity at the equilibrium price of $50 is 20.

A government decides to set a price ceiling on eggs so that eggs are affordable to the poor. The conditions of demand and supply are given in the table below. What will the excess supply or the shortage be if the price ceiling is set at $2.00?

3,000 shortage.

Compare a market operating at a quantity lower than equilibrium (ie. a price floor) with the same market operating at the equilibrium quantity. Which of the following statements are true?

A market operating below equilibrium will transfer some consumer surplus to producers.

In the following figure, which area represents producer surplus?

Area C.

total surplus equation

CS = ½ (base) (height) + PS = ½ (base) (height)

How does a price floor set above the equilibrium price affect quantity demanded and quantity supplied?

It results in a greater quantity supplied than the quantity demanded, otherwise known as excess supply.

shortage

The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below-equilibrium) price.

price floor

This is the lowest legal price that can be charged for a product.

price ceiling

a maximum price allowed by law five important effects 1. shortages 2. reductions in production quality 3. wasteful lines and other search costs 4. a loss in gains from trade (deadweight loss) 5. a. misallocation of resources

rent control

a price ceiling that usually works by stating that rents can be raised by only a certain maximum percentage each year

After earthquakes hit the California coast and damaged tens of thousands of cars, there was a growing demand and need for automotive repair, glass replacement, dent repair and repainting. In the labor market for car repair, the demand would be represented by ________, while supply would be represented by ________.

automotive body shops and glass repair and replacement companies; automotive workers

Some countries set price ceilings on basic necessities like cooking oil, sugar or flour. Consider the market for corn flour information below. To be binding, the price ceiling should be set

below $3.00. If the price ceiling is set below the equilibrium price, then it will be binding in the sense that it will prevent the market from reaching and settling at equilibrium.

price control

government laws to regulate prices instead of letting market forces determine prices

If the government sets floor prices for wheat or corn that guarantee farmers an above-market price for that product, the most probable result would be what?

overproduction.

Requiring that all employees get a minimum wage of $8.00 is an example of a

price floor.

If you were describing consumer surplus, you would say it is

the social surplus minus producer surplus

Isabel experiences diminishing marginal utility when

the value to her of each additional hat she purchases start falling

binding price ceiling

when the price ceiling is below the equilibrium price, resulting in a shortage

binding price floor

when the price floor is above the equilibrium price, resulting in surplus

Refer to the figure below. If the government set a price floor of $30, there would be

zero excess supply.