Ch. 6

ceiling

A legal maximum on the price at which a good can be sold is called a price

a legal maximum on the price at which a good can be sold.

A price ceiling is

below the equilibrium price, causing a shortage.

A price ceiling is binding when it is set

below the equilibrium price.

A price ceiling will be binding only if it is set

above the equilibrium price.

A price floor will be binding only if it is set

a binding price ceiling is imposed on a market.

A shortage results when

the minimum wage

An example of a price floor is

are efficient, but long lines are inefficient

As rationing mechanisms, prices

-the quantity of computers demanded will increase. -the quantity of computers supplied will decrease. -a shortage of computers will develop. All of the above are correct.

If a binding price ceiling is imposed on the computer market, then

the quantity sold in the market will stay the same

If a nonbonding price floor is imposed on a market, then

the equilibrium price is below the price ceiling.

If a price ceiling is not binding, then

the equilibrium price is above the price floor

If a price floor is not binding, then

price adjusts until quantity demanded equals quantity supplied.

In a competitive market free of government regulation,

price

In a free, competitive market, what is the rationing mechanism?

-price will no longer be the mechanism that rations scarce resources. -long lines of buyers may develop. -sellers could ration the good or service according to their own personal biases. All of the above are correct.

In response to a shortage caused by the imposition of a binding price ceiling on a market,

the U.S. government maintained a price ceiling on gasoline.

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

panel (b) but not panel (a)

Refer to Figure 6-1. A binding price ceiling is shown in

8 units

Refer to Table 6-1. Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market?

0 units

Refer to Table 6-1. Suppose the government imposes a price ceiling of $5 on this market. what will be the size of the shortage in this market?

$2

Refer to Table 6-1. Which of the following price ceilings would be binding in this market?

$4

Refer to Table 6-1. Which of the following price floors would be binding in this market?

0 units

Refer to Table 6-1. Suppose the government imposes a price floor of $1 on this market. What will be the size of the surplus in this market?

8 units

Refer to Table 6-1. Suppose the government imposes a price floor of $5 on this market. What will be the size of the surplus in this market?

a surplus of wheat

Refer to figure 6-2. In panel (b), there will be

the quantity demanded of physicals increases and the quantity supplied of physicals decreases.

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 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 floor of $250 per physical. As a result of the price floor,