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Wht happens when a binding
A price ceiling is the maximum price allowed for a commodity.
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- 2 What generally happens when the government sets a price ceiling?in a market with a binding ceiling, an increase in the ceiling will?Draw diagram of the effect of a binding price floor. Clearly label your axis, consumer and producer surplus, dead weight loss and equilibrium with and without the price floor.
- What is deadweight loss? How is it illustrated on a demand and supply diagram? GIve an example of deadweight loss.Suppose that policy makers are concerned that the price of corn may get too low. The market for corn is depicted in the accompanying diagram. a. What type of price control would policy makers use to keep the price of corn from getting too low? O a price floor a price ceiling a price marker a price war O a price wall b. Suppose that the government implements the price control that you have selected. Which of these prices would be binding? 10 9 8 7 Price ($) 6 5 4 3 0 2 0 1 Supply Demand 2 3 4 5 6 7 8 Quantity (in thousands of kilograms) 9 10Explain why the imposition of the price ceiling does not result in a deadweight loss.
- increasing opportunity costs O increasing marginal output Question 2 The minimum wage is an example of O a price ceiling a command economy a price floor the free market Question 3 NConsider the following market. Demand is given by Qd= 5- P where Qd is the quantity demand and P is the price. Supply is given by Qs = P/2 where Qs is the quantity supplied. a. What is the market equilibrium quantity and price? b Calculate consumer, producer and total surplus c. Suppose the government imposes a price floor of P = 4. Calculate the consumer surplus, producer surplus, and deadweight loss.It is an illegal market that emerges when binding and nonbinding price controls are in place. It is an illegal market that emerges when binding price ceilings are in place. O It is an illegal market that emerges when binding price floors are in place. It is an illegal market that emerges when only binding price ceilings and binding price floors are in place.. It is an illegal market that em erges when no price controls are present. Save Question 10 You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a: O binding price floor is high. binding price floor is low. nonbinding price ceiling is high. binding price ceiling is low. binding price ceiling is high.
- Draw a graph that shows the agricultural market in equilibrium with a binding price floor. Label equilibrium price, equilibrium quantity, and changes in consumer surplus, producer surplus, and deadweight loss on the graph. Is this prioce floor guaranteed to make producers better off?Figure 3-19 Price Refer to Figure 3-19. The total gains from trade, representing both producer and consumer surplus combined, is shown by the area O ABC O ACD BCE Quantity DCEQuestion 9 In the graph, which price would allow for a binding price ceiling? 16 12 D 20 40 60 $5 O $8 O $12 O $15 Question 10 MacBook Air O O OO
