ECON 2106 Study Guide - Midterm Guide: Price Ceiling, Price Gouging, Price Floor

82 views5 pages

coralguinea-pig410

17 Mar 2018

School

University of Georgia

Department

Economics

Course

ECON 2106

Professor

McWhite

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Attempt to set prices through government involvement in the market. A legal maximum on the price at which a good can be sold (rent control, price gouging laws) A legal minimum on the price at which a good can be sold (minimum wage) Explain the difference between binding and non-binding price controls. Non-binding price controls is a price floor/ceiling that does not actually apply to the equilibrium present in the market already. Example: if the equilibrium wage is , but the government institutes a price floor for minimum wage of . 50, it will not affect the people earning , so it is non-binding. Binding is the direct opposite of that. A price floor set below equilibrium and a price ceiling set above equilibrium would both be non-binding. In the long run, increased elasticity on the part of both producers and consumers makes the shortage larger than it was in the short run.

Related Questions

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

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.

A. The government prohibits gas stations from selling gasoline for more than $2.50 per gallon.

B. The government has instituted a legal minimum price of $3.40 per gallon for gasoline.

C. There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws.

skymacaw582

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.
	b.	The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.
	c.	The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.
	d.	The binding price ceiling will encourage oil companies to deplete the resource too quickly.
	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.
	b.	diseconomies of scale.
	c.	economies of scale.
	d.	constant returns to scale.
	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
	b.	increase; have no effect on
	c.	decrease; have no effect on
	d.	decrease; decrease
	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.
	b.	social costs.
	c.	common costs.
	d.	free-rider costs.
	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.
	b.	Equilibrium price will go up and equilibrium quantity will go down.
	c.	Equilibrium price will go up and equilibrium quantity will be indeterminate.
	d.	Equilibrium price will go down and equilibrium quantity will go up.
	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.
	b.	law that sets the minimum number of hours that an employee must work for wages during the week.
	c.	law that allows individual employers and employees to make free decisions.
	d.	law that requires quantity demanded to equal quantity supplied.
	e.	price ceiling.

taupezebra466

ECON 2106 Study Guide - Midterm Guide: Price Ceiling, Price Gouging, Price Floor

Document Summary

Get access

Related Documents

ECON 2106 Lecture Notes - Lecture 4: Price Ceiling, Price Gouging, Price Floor

ECON 1B03 Lecture Notes - Lecture 4: Price Ceiling, Price Floor, Shortage

EC120 Lecture Notes - Lecture 6: Economic Equilibrium, Price Ceiling, Price Floor

Related Questions