ECON 1B03 Study Guide - Midterm Guide: Average Variable Cost, Factor X, Sunk Costs

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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A price ceiling: is a legal maximum on the price at which a good can be sold. The price ceiling is not binding (not effective) if it is set above equilibrium price. The price ceiling is binding (effective) if set below equilibrium price, leading to a shortage. A price floor: a legal minimum on a price at which a good can be sold. The price floor is not binding if set below the equilibrium price. The price floor is binding if set above the equilibrium price, leading to a surplus. An upper limit on the quantity of a good that can be sold. Government usually issues quota licenses that give producers a right to produce a specified amount of a good. The number of taxis in a city is strictly controlled. The amount of fish you are allowed to catch and sell. Often seen with dairy products and agricultural products. Governments levy taxes to raise revenue for public projects.

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