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ECON 1200 Chapter Notes - Chapter 6: Price Ceiling, Price Floor, Economic Equilibrium

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carminebear339
28 Feb 2016
School
Fordham University
Department
Economics
Course
ECON 1200
Professor
Shannon Pullaro

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Document Summary

Controls on prices: price ceiling: legal max on price @ which a good can be sold, price floor: legal min on price @ which a good can be sold. How price ceilings affect market outcomes: 2 possible outcomes of price ceilings. Not binding price ceiling: price ceiling is imposed over equilibrium price & market forces able to naturally move economy to equilibrium (price ceiling has no effect on price/quantity sold) ) rationing mechanisms developed under price ceiling are inefficient: not all buyers benefit from binding price ceiling, when gov. imposes binding price ceiling on competitive market, shortage of god arises & sellers must ration scarce goods among large. How price floors affect market outcomes: 2 possible outcomes of price floors. Not binding price floor: price floor has no effect & market forces naturally move economy to equilibrium (price floor imposed is under equilibrium price)

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Related Questions

1.) An excise tax on a good typically reduces the net price received by the seller. (TRUE/FALSE)

2.) The burden of an excise tax on gasoline falls entirely on consumers of gasoline. (TRUE/FALSE)

3.) Rent controls are one of the few examples of a price floor in market economies. (TRUE/FALSE)

4.) Imposing a price ceiling below the equilibrium price of a good often leads to_____.

A) A greater supply of the good

B) A black market for the good

C) A rightward shift of the supply curve for the good.

D) A leftward shift of the demand curve for the good.

E) All of these

5.) Which of the following is true of price floors and ceilings?

A) Lead to the same price and quantity as in competitive market.

B) Lead to technical efficiency

C) Cause the demand curve to shift left

D) Usually result from government intervention

E) Cause the supply curve to shift right.

6.) Price ceilings often lead to black markets. (TRUE/FALSE)

7.) When minimum wage is above the equilibrium wage what occurs?

A) There will be a shortage of labor

B) There will be no effect on the number of people employed

C) There will be an increase in unemployment rate

D) There will be a decrease in unemployment rate

8.) An excise tax on a good typically reduces the price paid by the consumer (TRUE/FALSE)

9.) If a price ceiling is below the equilibrium price is imposed on a market, it will cause the quantity demanded to rise and the quantity supplied to fall. (TRUE/FALSE)

10.) Price floors often lead to black markets. (TRUE/FALSE)

11.) If an excise tax is imposed on restaurant meals what occurs?

A) Fewer meals will be produced and sold

B) More meals will be produced and sold

C) Market price of the meals will fall

D) Government tax revenue will fall.