Question 1

A consequence of either a price ceiling or a price floor is

Accepted Answer

A

Question 2

If a store sells a good at the market price,even though the government authorities have set the minimum price that can be charged,the store is selling the good in a(n)

Accepted Answer

The store is selling the good below the government-set minimum price, which constitutes a black market transaction.

Question 3

Why are binding price ceiling laws passed?

Accepted Answer

Binding price ceiling laws are passed to make a good less expensive for those customers who are able to purchase the good in the legal market. This is typically done in order to help low-income consumers afford essential goods and services. However, the downside of price ceilings is that they can also create shortages and reduce the overall availability of the good in question.

Question 4

Why do government leaders impose price controls?

Accepted Answer

Government leaders impose price controls to ensure that a social goal is satisfied. This can include making goods and services more affordable for low-income individuals or protecting consumers from price gouging during a crisis. However, price controls can also lead to unintended consequences such as shortages and black markets.

Question 5

Which of the following is an accurate statement about the consequence of a binding price ceiling?

Accepted Answer

A binding price ceiling sets a price limit below the equilibrium price, causing a shortage of the product. This shortage encourages consumers to turn to the black market to obtain the product at a higher price, often while sacrificing quality or safety standards. Therefore, binding price ceilings encourage the formation of a black market.

Question 6

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families.The law that sets food prices low enough to meet these requirements would be an example of a

Accepted Answer

The law that sets food prices low enough to ensure that all people can afford to buy enough food to feed their families is an example of a price ceiling. A price ceiling is a legal maximum price that can be charged for a good or service, typically set below the market equilibrium price to benefit consumers. In this case, it is set to ensure that all people can afford to buy enough food to feed their families in accordance with the fair wage law in Fairness.

Question 7

Mortimer loves sushi.He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law.Who would be affected by this law and how?

Accepted Answer

A binding price ceiling law would limit the amount that sellers can charge for sushi, which would lower prices and benefit consumers who can afford to buy it legally. However, consumers who are unable to buy it in the legal market would not be affected by this law. Sellers, on the other hand, would not benefit from this law as they would have to lower their prices, and they may not be able to make a profit selling sushi at the government-mandated price.

Question 8

Use the following information to answer the following questions.
Market for flat-screen TVs:
Demand: QS1U1B1dS1U1B0 = 2,600 - 5P
Supply: QS1U1B1sS1U1B0 = -1,000 + 10P
-What would be the quantity demanded if a price ceiling is set at $150?

Accepted Answer

At a price ceiling of $150, substitute P = 150 into the demand equation: QS1U1B1dS1U1B0 = 2,600 - 5(150) = 2,600 - 750 = 1,850.

Question 9

Why does a surplus exist under a binding price floor?

Accepted Answer

A binding price floor sets a minimum legal price that must be charged for a product. If this legal price is set higher than the equilibrium price determined by supply and demand forces, it creates a situation where the quantity supplied exceeds the quantity demanded at the higher price. This leads to a surplus of the product that sellers cannot sell at the higher legal price, resulting in excess supply.

Question 10

Why do shortages develop under a binding price ceiling?

Accepted Answer

A binding price ceiling is a government-imposed maximum price below the market equilibrium price. This policy reduces the price of the product, but it also creates excess demand, as the quantity demanded exceeds the quantity supplied at the lower price. As a result, shortages develop, as some buyers cannot find the product they want to buy at the lower price. While A, B, D, and E are possible effects of a price ceiling, in the case of a binding price ceiling, the quantity supplied does not increase, and the quality of the product is not likely to improve, as the sellers face a lower price and lower profits.

Question 11

Government officials who impose price controls

Accepted Answer

Price controls can cause confusion in the price signaling mechanism because they distort the true market price, leading to misallocation of resources. Government officials who impose price controls may not fully understand the unintended consequences of their actions.

Question 12

Why would a politician find it difficult to remove a binding price ceiling?

Accepted Answer

If a binding price ceiling greatly benefits some consumers who are also voters, a politician may find it difficult to remove it as those voters may be resistant to losing the benefits.

Question 13

Do all buyers benefit from a binding price ceiling?

Accepted Answer

A binding price ceiling, set below the market equilibrium price, creates a shortage because the quantity demanded exceeds the quantity supplied at that price. While some buyers benefit from the lower price, not all buyers can purchase the product due to the shortage, meaning only some buyers benefit.

Question 14

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower.Such a law is an example of a(n)

Accepted Answer

A law that limits the maximum amount of interest that a lender can charge a borrower is an example of a price ceiling. A price ceiling is a government-imposed limit on the price that can be charged for a good or service, typically set below the market equilibrium price. In this case, the government is setting a maximum interest rate that lenders can charge, which prevents them from charging higher rates that borrowers may not be able to afford.

Question 15

A binding price ceiling will have which of the following consequences?

Accepted Answer

A binding price ceiling, set below the equilibrium price, causes a shortage because the quantity demanded exceeds the quantity supplied at that price.

Question 16

If a store sells a good at the market price,even though the government authorities have set the maximum price that can be charged for it,the store is selling the good in a(n)

Accepted Answer

Selling a good at a market price higher than the government-set maximum price constitutes a black market transaction.

Question 17

A market where exchanges occur despite price regulations is called a(n)________ market.

Accepted Answer

A black market refers to a market where exchanges occur without the legal sanction of authorities or despite price regulations. It typically involves illegal goods or services.

Question 18

Price controls can be traced back as far as

Accepted Answer

Price controls date back to ancient Babylon, around 4,000 years ago, where the Code of Hammurabi included laws regulating prices.

Question 19

What is a black market?

Accepted Answer

The answer of What is a black market?
...

Question 20

What will happen in a market where a binding price ceiling is removed?

Accepted Answer

Removing a binding price ceiling allows prices to rise to the equilibrium level, encouraging producers to supply more and possibly improve quality to compete, thus making products more plentiful and potentially better in quality.

Quiz 6: Price Controls

A consequence of either a price ceiling or a price floor is

If a store sells a good at the market price,even though the government authorities have set the minimum price that can be charged,the store is selling the good in a(n)

Why are binding price ceiling laws passed?

Why do government leaders impose price controls?

Which of the following is an accurate statement about the consequence of a binding price ceiling?

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families.The law that sets food prices low enough to meet these requirements would be an example of a

Mortimer loves sushi.He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law.Who would be affected by this law and how?

Use the following information to answer the following questions. Market for flat-screen TVs: Demand: Q_d = 2,600 - 5P Supply: Q_s = -1,000 + 10P -What would be the quantity demanded if a price ceiling is set at $150?

Why does a surplus exist under a binding price floor?

Why do shortages develop under a binding price ceiling?

Government officials who impose price controls

Why would a politician find it difficult to remove a binding price ceiling?

Do all buyers benefit from a binding price ceiling?

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower.Such a law is an example of a(n)

A binding price ceiling will have which of the following consequences?

If a store sells a good at the market price,even though the government authorities have set the maximum price that can be charged for it,the store is selling the good in a(n)

A market where exchanges occur despite price regulations is called a(n) ________ market.

Price controls can be traced back as far as

What is a black market?

What will happen in a market where a binding price ceiling is removed?

Quiz 6: Price Controls

A consequence of either a price ceiling or a price floor is

If a store sells a good at the market price,even though the government authorities have set the minimum price that can be charged,the store is selling the good in a(n)

Why are binding price ceiling laws passed?

Why do government leaders impose price controls?

Which of the following is an accurate statement about the consequence of a binding price ceiling?

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families.The law that sets food prices low enough to meet these requirements would be an example of a

Mortimer loves sushi.He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law.Who would be affected by this law and how?

Use the following information to answer the following questions. Market for flat-screen TVs: Demand: Qd = 2,600 - 5P Supply: Qs = -1,000 + 10P -What would be the quantity demanded if a price ceiling is set at $150?

Why does a surplus exist under a binding price floor?

Why do shortages develop under a binding price ceiling?

Government officials who impose price controls

Why would a politician find it difficult to remove a binding price ceiling?

Do all buyers benefit from a binding price ceiling?

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower.Such a law is an example of a(n)

A binding price ceiling will have which of the following consequences?

If a store sells a good at the market price,even though the government authorities have set the maximum price that can be charged for it,the store is selling the good in a(n)

A market where exchanges occur despite price regulations is called a(n) ________ market.

Price controls can be traced back as far as

What is a black market?

What will happen in a market where a binding price ceiling is removed?

Use the following information to answer the following questions. Market for flat-screen TVs: Demand: Q_d = 2,600 - 5P Supply: Q_s = -1,000 + 10P -What would be the quantity demanded if a price ceiling is set at $150?