4. What would be the impact in this market, of a price floor set at $22 a) A market surplus of 7 b) A market surplus of 10 c) A market surplus of 21 d) There would be no impact e) A market shortage of 7 f) A market shortage of 10 g) A market shortage of 215. What would be the impact in this market, of a price ceiling set at $4 a) A market surplus of 7 b) A market surplus of 10 c) A market surplus of 21 d) There would be no impact e) A market shortage of 7 f) A market shortage of 10 g) A market shortage of 21 28 P2420161284004 8121620SDQ24

Answered: What would be the impact in this…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. What would be the impact in this market, of a price floor set at $22

		a) A market surplus of 7
		b) A market surplus of 10
		c) A market surplus of 21
		d) There would be no impact
		e) A market shortage of 7
		f) A market shortage of 10
		g) A market shortage of 21

5. What would be the impact in this market, of a price ceiling set at $4

		a) A market surplus of 7
		b) A market surplus of 10
		c) A market surplus of 21
		d) There would be no impact
		e) A market shortage of 7
		f) A market shortage of 10
		g) A market shortage of 21

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Expert Solution

Step 1: Define price floor and price ceiling

A price ceiling is the price set by the government which is the maximum that should be charged from the customer.

The price ceiling is binding when it lies below the equilibrium price.

A price floor is the price set by the government which is the minimum that should be charged from the customer.

The price floor is binding when it lies above the equilibrium price.

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