Homework 3.4 Price Ceilings and Price Floors

The table below represents the market for wheat. Suppose there is a price floor set at $8.00 for a bushel. Calculate the surplus caused by the price floor.

$10,750\text{ bushels of wheat}$ A price floor keeps the price for a good from falling below a set minimum. An effective price floor is set above equilibrium price. To calculate the surplus caused by the price floor, subtract the quantity demanded from the quantity supplied. In this case, the surplus is equal to 16,750−6,000=10,750 bushels of wheat.

The graph below represents the market for strawberries. A supply and a demand curve are shown with a price floor at $8.50. Equilibrium price is $5 and the equilibrium quantity is 135 baskets of strawberries. The quantity demanded at the price floor is 75 baskets of strawberries and the quantity supplied is 480 baskets of strawberries. Calculate the surplus caused by the price floor.

$405\text{ baskets of strawberries}$ A price floor keeps the price for a good from falling below a set minimum. An effective price floor is set above equilibrium price. To calculate the surplus caused by the price floor, subtract the quantity demanded from the quantity supplied. In this case, the surplus is equal to 480−75, or 405 baskets of strawberries

A blizzard hits North Carolina, and a price ceiling of $15 is put on snow shovels. Calculate the shortage caused by the price ceiling.

$450\text{ snow shovels}$ A price ceiling keeps the price for a good from rising above a set maximum. An effective price ceiling is set below equilibrium price. To calculate the shortage caused by the price ceiling, subtract the quantity supplied from the quantity demanded. In this case, the shortage is equal to 750−300, or 450 snow shovels.

The graph below represents the market for gasoline. Calculate the shortage caused by the price ceiling.

A price ceiling keeps the price for a good from rising above a set maximum. An effective price ceiling is set below equilibrium price. To calculate the shortage caused by the price ceiling, subtract the quantity supplied from the quantity demanded. In this case, the shortage is equal to 1,200−140, or 1,060 thousands of gallons of gas.

A snow storm hits Atlanta in March. The table below represents the market for milk. Suppose there is a price ceiling set at $3.50 per gallon to avoid price gouging. Calculate the shortage caused by the price ceiling.

A price ceiling keeps the price for a good from rising above a set maximum. An effective price ceiling is set below equilibrium price. To calculate the shortage caused by the price ceiling, subtract the quantity supplied from the quantity demanded. In this case, the shortage is equal to 3,800−1,300, or 2,500 gallons of milk.

Which of the following is the definition of price floor? Select the correct answer below: A price floor is the total number of units of a good or service consumers are willing to purchase at a given price. A price floor is the maximum amount that can legally be charged for a good or service. A price floor is the total number of units of a good or service producers are willing to sell at a given price above the equilibrium. A price floor is the minimum amount that can legally be charged for a good or service.

A price floor is the minimum amount that can legally be charged for a good or service. A price floor is defined as the minimum amount that can legally be charged for a good or service. An effective price floor is set above equilibrium and is meant to help the producer. At a price floor set above equilibrium quantity supplied is greater than quantity demanded which results in a surplus.

Assume that the market equilibrium price is 50 cents for a pound of bananas, and the quantity sold is roughly 10 pounds. What kind of price control could generate an excess supply of bananas? Select the correct answer below: A price floor of 25 cents per pound A price floor of 50 cents per pound A price floor of 75 cents per pound None of the above

A price floor of 75 cents per pound A basic lesson of a price floor is that when it is set above the market equilibrium price, this will lead to excess supply. Setting a price for a pound of bananas at 75 cents will generate a surplus since the quantity demanded will be lower than the quantity supplied.

True or false?Price ceilings are typically enacted in an attempt to keep prices high for those who produce the product.

False Price ceilings are typically enacted in an attempt to keep prices low for those who demand the product. A price floor is enacted to keep prices high for producers.

If the equilibrium price of yellowfin tuna is $30.00 per pound, and a price floor for yellowfin tuna is set at $35.00 per pound, what will happen? Select the correct answer below: There will be a surplus of yellowfin tuna. The quantity of yellowfin tuna demanded will rise and the quantity supplied will fall, causing a shortage. Consumers will benefit more than producers. The quantity supplied will rise and the quantity demanded will stay constant, creating a deficit.

There will be a surplus of yellowfin tuna. A price floor is defined as the minimum amount that can legally be charged for a good or service. An effective price floor is set above equilibrium and is meant to help the producer. A price floor set above equilibrium results in the quantity supplied being greater than quantity demanded which results in a surplus. Because the legal price of tuna is greater than the equilibrium of yellowfin tuna, the quantity supplied will be greater than the quantity demanded.

Which of the following would be consequences of more rental properties in the United States being subject to binding price ceilings? Select the two correct answers below. Select all that apply: a shortage of apartments a surplus of apartments the quantity supplied of apartments will exceed the quantity demanded the quantity demanded of apartments will exceed the quantity supplied

a shortage of apartments the quantity demanded of apartments will exceed the quantity supplied When a binding rent ceiling is instituted, this causes the price in the market for apartments to be below equilibrium. As a result, there will be more people looking for apartments than there will be landlords looking to rent out apartments. A shortage of apartments will result.

A price floor will usually tend to create ___________ when the price floor is set above the market price. Select the correct answer below: a shortage excess demand excess supply an equilibrium

excess supply A price floor will tend to create conditions of excess supply as a result of the misalignment in the market forces of more supply produced than demanded at this higher price. If price is set above equilibrium, quantity demand decreases while quantity supplied increases, causing a shortage to exist in the market.

Assuming a market is currently at the equilibrium price and quantity, when a price ceiling is set below the equilibrium price, ______________. Select the correct answer below: the quantity demanded will rise and the quantity supplied will fall, causing a shortage there is nothing preventing the price from falling to its equilibrium level there is nothing preventing the price from rising to its equilibrium level the quantity supplied will rise and the quantity demanded will fall, causing a surplus

the quantity demanded will rise and the quantity supplied will fall, causing a shortage When a price ceiling is set below the equilibrium price, the quantity demanded will rise and the quantity supplied will fall, causing a shortage.