ECON 1200 Lecture Notes - Lecture 8: Price Ceiling, Price Floor, Economic Equilibrium
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QUESTION 16
Positive externalities exist because:
| Ā | a. |
internal benefits are greater than external benefits. |
| Ā | b. |
internal benefits are greater than social benefits. |
| Ā | c. |
internal benefits are less than external benefits. |
| Ā | d. |
external benefits are greater than social benefits. |
| Ā | e. |
internal benefits are less than social benefits. |
QUESTION 17
What is a black market?
| Ā | a. |
It is an illegal market that emerges when binding price ceilings are in place. |
| Ā | b. |
It is an illegal market that emerges when only binding price ceilings and binding price floors are in place. |
| Ā | c. |
It is an illegal market that emerges when no price controls are present. |
| Ā | d. |
It is an illegal market that emerges when binding and nonbinding price controls are in |
| Ā | e. |
It is an illegal market that emerges when binding price floors are in place. |
QUESTION 18
The personal decisions of consumers and firms are based on:
| Ā | a. |
external costs. |
| Ā | b. |
public-good costs. |
| Ā | c. |
third-party costs. |
| Ā | d. |
internal costs. |
| Ā | e. |
social cost. |
QUESTION 19
When the price is _________ the equilibrium price, we would expect there to be a _________, causing the market to put _________ pressure on the price until it went back to the equilibrium price.
| Ā | a. |
below; shortage; downward |
| Ā | b. |
above; shortage; downward |
| Ā | c. |
above; surplus; upward |
| Ā | d. |
above; surplus; downward |
| Ā | e. |
below; surplus; upward |
Ā
1. The language of price controls
Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon.
Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.
| Statement | Price Control | Binding or Not |
|---|---|---|
| Due to new regulations, gas stations that would like to pay better wages in order to hire more workers are prohibited from doing so. | price ceiling/price floor | binding/non |
| The government has instituted a legal minimum price of $2.70 per gallon for gasoline.price ceiling/price floor | ||
| The government prohibits gas stations from selling gasoline for more than $3.40 per gallon.price ceiling/price floor |
