Midterm 2 Macro Econ chapter 6
Which of the following price ceilings would be binding in this market?
$2
Which of the following price floors would be binding in this market?
$4
Suppose the government imposes a price ceiling of $5 on this market. What will be the size of the shortage in this market?
0 units
Suppose the government imposes a price floor of $1 on this market. What will be the size of the surplus in this market?
0 units
Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market?
8 units
Suppose the government imposes a price floor of $5 on this market. What will be the size of the surplus in this market?
8 units
A shortage results when
a binding price ceiling is imposed on a market.
A price ceiling is
a legal maximum on the price at which a good can be sold
In panel (b), there will be
a surplus of wheat.
In response to a shortage caused by the imposition of a binding price ceiling on a market,
a. price will no longer be the mechanism that rations scarce resources. b. long lines of buyers may develop. c. sellers could ration the good or service according to their own personal biases. *d. All of the above are correct.
If a binding price ceiling is imposed on the computer market, then
a. the quantity of computers demanded will increase. b. the quantity of computers supplied will decrease. c. a shortage of computers will develop. *d. All of the above are correct.
A price floor will be binding only if it is set
above the equilibrium price.
As rationing mechanisms, prices
are efficient, but long lines are inefficient.
A price ceiling will be binding only if it is set
below the equilibrium price
A price ceiling is binding when it is set
below the equilibrium price, causing a shortage
A legal maximum on the price at which a good can be sold is called a price
ceiling.
A binding price ceiling is shown in
panel (b) but not panel (a).
In a free, competitive market, what is the rationing mechanism?
price
In a competitive market free of government regulation,
price adjusts until quantity demanded equals quantity supplied.
In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that
the U.S. government maintained a price ceiling on gasoline.
If a price floor is not binding, then
the equilibrium price is above the price floor.
If a price ceiling is not binding, then
the equilibrium price is below the price ceiling.
An example of a price floor is
the minimum wage.
Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price floor of $250 per physical. As a result of the price floor,
the quantity demanded of physicals decreases and the quantity of physicals doctors want to give increases
Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
the quantity demanded of physicals increases and the quantity supplied of physicals decreases.
If a nonbinding price floor is imposed on a market, then
the quantity sold in the market will stay the same.
