MRU8.3: Price Ceilings: Lines and Search Costs

How do you calculate the total value of time wasted by buyers waiting in line to buy a good in a market with a price ceiling? - (price buyers are willing to pay + time price) × quantity supplied - (price buyers are willing to pay − controlled price) × time price - (price buyers are willing to pay − controlled price) × quantity supplied - (controlled price − time price) × quantity supplied

A: (price buyers are willing to pay − controlled price) × quantity supplied

Suppose buyers are waiting in line to try to obtain a good that is in short supply due to a price ceiling. How long will this line get? - As long as it takes for the time cost to be equal to the equilibrium price that would exist without the price control - As long as it takes for the time cost to be equal to the difference between the price buyers are willing to pay and the controlled price - As long as it takes for the time cost to be equal to the gains from trade lost as a result of the price control - As long as it takes for the time cost to be equal to the money cost

A: As long as it takes for the time cost to be equal to the difference between the price buyers are willing to pay and the controlled price

Which of the following is true about the price buyers are willing to pay on the margin for another unit of a good in a market with a price ceiling? - Buyers are not willing to pay as much as sellers are willing to accept. - Buyers are willing to pay more in time than they are in money. - Buyers are not willing to pay as much as they are required to pay. - Buyers are willing to pay more than they are allowed to pay.

A: Buyers are willing to pay more than they are allowed to pay.

Which of the following is NOT mentioned in the video as another form that competition among buyers may take under a price control? - Buyers bribing producers - Buyers pushing the price up - Buyers using political connections - Buyers waiting in line

A: Buyers pushing the price up

What will happen if buyers value a certain good at $5 per unit, but are able to acquire that good for a $2 controlled price plus $2 in time spent waiting in line? - Nothing will happen because price controls eliminate competition. - Other buyers will bid up the price by arriving earlier, making the line longer. - Quantity supplied will increase, driving up the price and equilibrating the market. - Buyers will exit the line until the total price equals $5 per unit.

A: Other buyers will bid up the price by arriving earlier, making the line longer.

Which is a better form of competition: to have buyers pay in money or to have buyers pay in time? - Paying in money is better, because a market cannot reach equilibrium if money is not involved. - Neither is better than the other; they are simply two different forms of the same competitive force. - Paying in time is better, because paying in money is unfair for those who don't have as much money. - Paying in money is better, because money goes to another party whereas time goes nowhere.

A: Paying in money is better, because money goes to another party whereas time goes nowhere.

On the demand and supply diagram of a price ceiling, what quantity of the good is actually bought and sold? - The difference between quantity demanded and quantity supplied at the controlled price - The equilibrium quantity in the market - The quantity demanded at the controlled price - The quantity supplied at the controlled price

A: The quantity supplied at the controlled price

What impact do price controls have on competition in a market? - They change who the competitors are. - They change the form that competition takes. - They change the eventual outcome of the competition. - They change whether competition is legal or illegal.

A: They change the form that competition takes.

Price controls ________ competition because competition is _______. - improve; unethical when solely based on prices - do not eliminate; present in only one form of social organization - do not eliminate; present in all forms of social organization - dampen; usually carried out by firms that rely on prices

A: do not eliminate; present in all forms of social organization

The shortage caused by a price ceiling on gasoline: - raises neither the willingness to pay for gasoline nor the price. - raises the price of gasoline but not the willingness to pay for gasoline. - raises the willingness to pay for gasoline but not the price. - raises the willingness to pay for gasoline as well as the price.

A: raises the willingness to pay for gasoline but not the price.