Macro - 3.4 Price Ceilings and Price Floors
Suppose there is a price floor set at $2.50 an ear. Calculate the surplus caused by the price floor. Quantity supplied: 2,400 Quantity demanded: 475
1,925 ears of corn 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 2,400−475=1,925 ears of corn.
A snow storm hits Atlanta in March. Suppose there is a price ceiling set at $3.50 per gallon of milk to avoid price gouging. Calculate the shortage caused by the price ceiling. Quantity supplied: 1,300 Quantity demanded: 3,800
2500 gallons of milk 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? 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? 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.
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. 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.
