Assignment 2:ECO 202:ECO 202 Assignment 2 – Price control, market efficiency: Questions & Answers: Updated A+ Score Guide Solution

ECO 202 Assignment 2 – Price control, market
efficiency: Questions & Answers



True / False

1. At a government-controlled disequilibrium price, the quantity actually
traded equals the greater of quantity demanded and quantity supplied.
2. A binding price ceiling always creates a surplus.
3. A binding price floor always creates a shortage.
4. If a price floor is set below the equilibrium price, it has no effect on the
market.
5. Shortages in competitive markets are eliminated by price decreases.
6. Surpluses in competitive markets are eliminated by price increases.
7. A minimum wage is an example of a price ceiling in the labour market.
8. If a price ceiling is set above the equilibrium price, it is non-binding.
9. When a binding price ceiling creates a shortage, some buyers will be unable
to purchase the good at the legal price.
10. At a binding price floor, sellers cannot sell all they would like at that price.
11. Eliminating a binding price ceiling will cause price to rise, quantity
demanded to fall, and quantity supplied to rise.
12. Eliminating a binding price floor will cause price to fall, quantity demanded
to rise, and quantity supplied to fall.
13. A price ceiling below equilibrium reduces the quantity exchanged
compared to the free market.
14. Government price controls ensure that the market price is fair and efficient.
15. Black markets often arise when legal price ceilings create shortages.

, Answers

1. False
2. False
3. False
4. True
5. False
6. False
7. False
8. True
9. True
10. True
11. True
12. True
13. True
14. False
15. True




MCQs
1.

At a price set below equilibrium, the quantity exchanged equals
A) quantity demanded
B) quantity supplied
C) the greater of Qd and Qs
D) the lesser of Qd and Qs
E) equilibrium quantity

Answer: D



2.