Price Ceilings: Shortages and Quality Reduction Practice Questions

If the government forced all bread manufacturers to sell their products at a "fair price" that was half the current, free-market price, what would happen to the quantity supplied of bread? a. quantity supplied decreases. b. quantity supplied increases. c. Indeterminate with the given information.

a. quantity supplied decreases.

If the government places a price ceiling of $2 on milk, how large with the shortage be? a. 2300 gallons b. 2100 gallons c. 3500 gallons d. 2000 gallons

b. 2100 gallons

If a government decides to make health insurance affordable by requiring all health insurance companies to cut their prices by 30%, what will probably happen to the number of people covered by health insurance? a. More people will be covered because it's cheaper and more people can now afford it. b. Fewer people will be covered because health insurance companies will supply less. c. The number of insured will not change. d. Indeterminate with the given information.

b. Fewer people will be covered because health insurance companies will supply less.

With these price controls on bread, would you expect bread quality to rise or fall? a. Quality rises b. Quality falls c. Indeterminate with the given information.

b. Quality falls

Suppose that the quantity demanded and quantity supplied in the market for milk is as follows: $5: QD- 1000, QS- 5000 $4: QD- 2000, QS-4500 $3: QD- 3500, QS- 3500 $2: QD- 4100, QS- 2000 $1: QD- 6000, QS-1000 What is the equilibrium price and quantity of milk? a. price: $4; quantity: 4500 b. price: $3; quantity: 3500 c. price: $2, quantity: 2000 d. Indeterminate from the information given.

b. price: $3; quantity: 3500