A price ceiling is defined as the __________ legal price that can be charged in the market.
Maximum
A binding price ceiling tends to create what type of condition in the market? Shortage
When a shortage exists, there is a tendency for price to ________ in order to equate quantity
demanded and quantity supplied. Rise
A price floor is defined as the ________________ legal price that a firm can charge in a market.
minimum
If the price of a good or service exceeds the equilibrium price, a _____ exists. As a result, price
tends to _____. (Enter one word per blank.) Surplus; fall
When a price floor is applied to a product and the government buys and discards the resulting
surplus, the deadweight loss from the price floor _________. becomes larger
Demand is given by: Qd = 20 - 3P
Supply is given by: Qs = 2 + 3P
Determine the equilibrium price (P*) and quantity (Q*). P = $3; Q = 11
Comparative static analysis assumes which of the following? No price ceilings
Goods are allocated by price
No price floors
A price ceiling is considered effective if it is set _________ the equilibrium price. below
, Other things remaining constant, when demand for a good or service decreases, which of the
following occur(s)? Equilibrium quantity decreases
Equilibrium price decreases
What type of price control will the government impose if it considers the equilibrium price to be
too high? Price ceiling
Which of the following occur(s) when the supply of a good or service decreases and demand
remains the same? Equilibrium price increases
Equilibrium quantity decreases
Which of the following is an example of a price floor? Minimum wage
What can we predict about the market for craft beer if both demand and supply decrease
simultaneously? Equilibrium quantity decreases.
True or false: When a price floor applies to a product, rather than labor, the deadweight loss will
always be less. False.
Reason:
Deadweight loss may be greater for a product compared to labor.
What type of analysis studies the movement from one equilibrium to another? Comparative
static analysis
Maximum
A binding price ceiling tends to create what type of condition in the market? Shortage
When a shortage exists, there is a tendency for price to ________ in order to equate quantity
demanded and quantity supplied. Rise
A price floor is defined as the ________________ legal price that a firm can charge in a market.
minimum
If the price of a good or service exceeds the equilibrium price, a _____ exists. As a result, price
tends to _____. (Enter one word per blank.) Surplus; fall
When a price floor is applied to a product and the government buys and discards the resulting
surplus, the deadweight loss from the price floor _________. becomes larger
Demand is given by: Qd = 20 - 3P
Supply is given by: Qs = 2 + 3P
Determine the equilibrium price (P*) and quantity (Q*). P = $3; Q = 11
Comparative static analysis assumes which of the following? No price ceilings
Goods are allocated by price
No price floors
A price ceiling is considered effective if it is set _________ the equilibrium price. below
, Other things remaining constant, when demand for a good or service decreases, which of the
following occur(s)? Equilibrium quantity decreases
Equilibrium price decreases
What type of price control will the government impose if it considers the equilibrium price to be
too high? Price ceiling
Which of the following occur(s) when the supply of a good or service decreases and demand
remains the same? Equilibrium price increases
Equilibrium quantity decreases
Which of the following is an example of a price floor? Minimum wage
What can we predict about the market for craft beer if both demand and supply decrease
simultaneously? Equilibrium quantity decreases.
True or false: When a price floor applies to a product, rather than labor, the deadweight loss will
always be less. False.
Reason:
Deadweight loss may be greater for a product compared to labor.
What type of analysis studies the movement from one equilibrium to another? Comparative
static analysis
