ECO101H1 Chapter Notes - Chapter 6: Price Ceiling, Price Floor, Economic Equilibrium
ECO101H1 Full Course Notes
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A recent study found that the demand and supply schedules for flying disks are as follows:
Price | Quantity Demanded | Quantity Supplied |
---|---|---|
(Dollars per disk) | (Millions of disks) | (Millions of disks) |
11 | 1 | 15 |
10 | 2 | 12 |
9 | 4 | 9 |
8 | 6 | 6 |
7 | 8 | 3 |
6 | 10 | 1 |
Complete the first row of the following table by indicating the equilibrium price and the equilibrium quantity of flying disks in the absence of any price controls.
Scenario | Market Price | Market Quantity | Binding or Not Binding |
---|---|---|---|
(Dollars per disk) | (Millions of disks) | ||
No Price Control | N/A | ||
Price Floor | |||
Price Ceiling |
Flying disk manufacturers persuade the government that flying disk production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price.
Complete the second row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price floor $2 above the equilibrium price. Then indicate whether the price floor is binding or not binding.
Irate college students march on Washington and demand a reduction in the price of flying disks. An even more concerned Congress votes to repeal the price floor and impose a price ceiling $3 below the former price floor.
Complete the final row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price ceiling $3 below the former price floor. Then indicate whether the price ceiling is binding or not binding.
QUESTION 38
You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?
a. |
The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline. |
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b. |
The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school. |
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c. |
The binding price ceiling will increase the likelihood that customers obtain needed |
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d. |
The binding price ceiling will encourage oil companies to deplete the resource too quickly. |
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e. |
The binding price ceiling will cause firms to produce only gasoline of the highest quality. |
1.05000 points
QUESTION 39
If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing:
a. |
increasing returns from specialization. |
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b. |
diseconomies of scale. |
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c. |
economies of scale. |
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d. |
constant returns to scale. |
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e. |
diminishing marginal product. |
1.05000 points
QUESTION 40
A(n) __________ in the elasticity of supply or demand in a market for a good that is taxed would tend to __________ tax revenue from that tax.
a. |
increase; increase |
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b. |
increase; have no effect on |
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c. |
decrease; have no effect on |
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d. |
decrease; decrease |
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e. |
increase; decrease |
1.05000 points
QUESTION 41
The costs of a market activity paid for by an individual engaged in the market activity are:
a. |
external costs. |
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b. |
social costs. |
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c. |
common costs. |
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d. |
free-rider costs. |
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e. |
internal costs. |
1.05000 points
QUESTION 42
Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?
a. |
Equilibrium price will go down and equilibrium quantity will be indeterminate. |
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b. |
Equilibrium price will go up and equilibrium quantity will go down. |
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c. |
Equilibrium price will go up and equilibrium quantity will be indeterminate. |
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d. |
Equilibrium price will go down and equilibrium quantity will go up. |
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e. |
Equilibrium price will go up and equilibrium quantity will go up. |
1.05000 points
QUESTION 43
The minimum wage law is an example of a:
a. |
price floor. |
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b. |
law that sets the minimum number of hours that an employee must work for wages during the week. |
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c. |
law that allows individual employers and employees to make free decisions. |
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d. |
law that requires quantity demanded to equal quantity supplied. |
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e. |
price ceiling. |