Unit 6: Price ceiling and Price Floor

Front

When a price ceiling is in place keeping the price below the market price, what’s larger: quantity demanded or quantity supplied?

Back

Quantity demanded

Front

Suppose that the market for coats is described as follows: What is the equilibrium price of coats?

Back

100

Front

Suppose the government sets a price ceiling of $80. How large will the shortage be?

Back

4 million coats

Front

Suppose again that the government sets a price ceiling of $80 and that people line up to get this good. For how long will people wait in line to obtain a coat if they value their time at $10 an hour?

Back

4 hours

Front

Why were there no long lines outside gas stations between 2000 and 2008 despite rising oil and gasoline prices?

Back

There was no price control on gasoline at the time.

Front

Who will probably spend more time waiting in line to get scarce, price-controlled goods: Working people or Retired people?

Back

Retired people

Front

Which job exists in part because time-sensitive wealthy individuals want to pay someone else to wait in line for them?

Back

Ticket scalpers

Front

What gains from trade are lost if the government shuts down the black market for emergency items during a crisis like Hurricane Katrina, where a person values a flashlight at $5 and its black market price is $40?

Back

$35

Front

When will entrepreneurs be more likely to fill up their pickup trucks with flashlights and drive into a disaster area: when they can sell their flashlights for $5 each or when they can sell them for $40 each?

Back

$40

Front

Suppose the government forced all bread manufacturers to sell their products at a “fair price” that was half the current, free-market price. To keep it simple, assume that people must wait in line to get bread at the controlled price. Would consumer surplus rise, fall, or can’t you tell with the information given?

Back

consumer surplus decreases.