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2. The language of price controls Consider the market for milk. Suppose that, in a competitive market without government regulations, the equilibrium price of milk is $3.50 per gallon, and employees at grocery stores eam $9.50 per hour. 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 results in a shortage or a surplus or has no effect on the price and quantity that prevail in the market. Statement Price Control Effect Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from paying more than $7.50 per hour. The government has instituted a legal minimum price of $3.00 per gallon for milk. The government prohibits grocery stores from selling milk for more than $3.00 per gal

2. The language of price controls Consider the market for milk. Suppose that, in a competitive market without government regulations, the equilibrium price of milk is $3.50 per gallon, and employees at grocery stores eam $9.50 per hour. 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 results in a shortage or a surplus or has no effect on the price and quantity that prevail in the market. Statement Price Control Effect Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from paying more than $7.50 per hour. The government has instituted a legal minimum price of $3.00 per gallon for milk. The government prohibits grocery stores from selling milk for more than $3.00 per gal

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### 2. The Language of Price Controls Consider the market for milk. Suppose that, in a competitive market without government regulations, the equilibrium price of milk is $3.50 per gallon, and employees at grocery stores earn $9.50 per hour. 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 results in a shortage or a surplus or has no effect on the price and quantity that prevail in the market. | **Statement** | **Price Control** | **Effect** | |---------------|--------------------|------------| | Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from paying more than $7.50 per hour. | | | | The government has instituted a legal minimum price of $3.00 per gallon for milk. | | | | The government prohibits grocery stores from selling milk for more than $3.00 per gallon. | | | In this exercise, you will determine the type of price control (price ceiling or price floor) and the resulting market effect (shortage or surplus) associated with each statement.
Transcribed Image Text:### 2. The Language of Price Controls Consider the market for milk. Suppose that, in a competitive market without government regulations, the equilibrium price of milk is $3.50 per gallon, and employees at grocery stores earn $9.50 per hour. 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 results in a shortage or a surplus or has no effect on the price and quantity that prevail in the market. | **Statement** | **Price Control** | **Effect** | |---------------|--------------------|------------| | Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from paying more than $7.50 per hour. | | | | The government has instituted a legal minimum price of $3.00 per gallon for milk. | | | | The government prohibits grocery stores from selling milk for more than $3.00 per gallon. | | | In this exercise, you will determine the type of price control (price ceiling or price floor) and the resulting market effect (shortage or surplus) associated with each statement.
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