Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 4CQ
To determine
Explain the
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What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an impact on the market.
The graph below shows a price ceiling that happens to lie exactly at the equilibrium price. Drag the price ceiling line (Pceil) away from
the equilibrium price, either up or down, to make it a nonbinding price ceiling.
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Price
D
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If the quantity exchanged in a market is greater than the equilibrium quantity, then the supply price is greater than the demand price. Explain why.
Chapter 4 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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- Suppose the government forces the price to be above the equilibrium. Is this called a price floor or a price ceiling? Explain why the government might do this and the likely economic impact of the price floor or ceiling. Then, explain how market forces will attempt to move the market price to equilibrium.arrow_forwardMacmillan Learning For this question, it would probably be very helpful for you to sketch the market on a separate piece of paper to help you. A market is characterized by the equations below: P = 200 - 2Q P = 5+3Q Suppose a price floor of $140 is imposed on this market Is this price floor a binding price floor or a non-binding price floor? binding price floor non-binding price floor What is the quantity demanded at this price floor? Qd= What is the quantity supplied at this price floor? Qs=arrow_forwardGiven the following table, plot the demand and supply curves for cheese. Price Quantity Demanded Quantity Supplied $7 5 15 5 10 10 3 15 5 Would $3 be considered an effective (i.e., binding) price ceiling? With an effective price ceiling, what will happen to the market for cheese? Be specific. If the price ceiling was removed from the model, what will happen to price, quantity demanded, and quantity supplied? Be specific. What effect would a $7 price ceiling have on this market? What price and quantity will show up in the market?arrow_forward
- What will happen in a market where the equilibrium price is $5 and a price ceiling of $4 is enacted? What about a price floor of $4?arrow_forwardExplain what would be likely to happen if the government placed a price floor on milk. Suppose that the price of milk is $4/gallon, and the government prohibits anyone from selling milk for less than $5/gallon. Your answer should consist of a complete well-written paragraph using complete sentences as well as a supply and demand diagram.arrow_forwardDoes a price floor attempt to make a price higher or lower?arrow_forward
- Use the information provided in Table 18.1, to plot the price ceiling of $400 on skateboards. What will be the result (both in words and stating the vales) of the price ceiling of $400on skate boards? use the image to answer the questionarrow_forwardhow can price controls be used to avoid prices from increasing furtherarrow_forwardBelow is a graph of the market for apples annually. Assume the government has imposed a price floor of $10 per crate. Use the graph and assumption to answer questions 1a – 1c. What are the original market equilibrium price and quantity for apples before the price floor is imposed? How many crates of apples will be sold after the price floor has been imposed? Will there be a shortage or a surplus? If there is a shortage or a surplus, how large will it be? Will apple producers benefit from the price floor? Explain.arrow_forward
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