Price Controls

Price controls are 

• market forces that move a market to equilibrium
• legally mandated maximum or minimum prices for a good or service
• limits on the amount a company is allowed to produce
• limits on the amount a consumer is allowed to purchase

A price ceiling 

• sets an upper limit on how much producers are allowed to purchase
• sets a minimum legal price for a product
• sets the maximum legal price for a product
• sets a lower limit on how much consumers are allowed to buy

A price ceiling set below the current equilibrium price 

• leads to a surplus
• has no impact
• changes the equilibrium
• leads to a shortage

Price controls ____________________ with free market forces that establish price

• interfere with
• interact with
• complement
• supplement

A price ceiling leads to shortages because, at lower prices, 

• firms are prohibited from producing as much as they want
• companies want to produce more and consumers want to produce more
• companies want to supply less and consumers want to buy more
• consumers don't want to buy as much

Price ceilings lead to black markets because

• People act to maximize their utility and firms act to maximize their profits
• There are always people ready to scam other people
• There are always people ready to stand up to The Man
• Consumers and suppliers demand the market reach equilibrium

A black market is 

• a market in which there are high barriers to entry and homogeneous products.
• a market with only one supplier and unlimited demand.
• a market where there are many buyers and sellers and few consumers.
• a market in which sellers illegally sell to buyers at higher than legal prices

If a price ceiling causes a black market to emerge, the price in the black market will be 

• lower than the price in the controlled market.
• higher than the price in the controlled market
• the same as the price in the controlled market.

Which consumers will leave the controlled market to purchase gas in the black market?

• All the consumers who can't get enough gas in the controlled market.
• The consumers who have connections to black market suppliers.
• Those consumers who are willing and able to pay the black-market price.
• The consumers who did not get any gas allocated to them.

What happens to the total demand for gas in the controlled market when a black market emerges?

• It goes up.
• It goes down.
• It stays the same.