Price Ceilings

Which letter corresponds to consumer surplus?

• A
• B
• C
• A & B

Which letter corresponds to producer surplus?

• A
• B
• C
• A & B

If the equilibrium price of the good increases to $4 because of an increase in demand, what happens to total producer surplus?

• It decreases
• It stays the same
• It increases

At the free market price, the quantity demanded is _____ and quantity supplied is _____. 

• 50, 120
• 120, 120
• 120, 50
• 50, 50

If the government creates a price ceiling of $30, which one of the following statements is correct?

• The quantity demanded = 60
• The quantity supplied = 160
• There is a surplus of 100
• There is a shortage of 100

Suppose the mayor of this city imposes a price ceiling at $5.50. How large is the shortage of rides?

• 1 million
• 2 million
• 3 million
• 4 million

If an effective rent ceiling is eliminated, which of the following is most likely to occur in the rental housing market? 

• An increase in the demand for housing, resulting in a decrease in the quantity of housing supplied 
• An increase in the demand for housing, resulting in an increase in the quantity of housing demanded 
• An increase in rents, resulting in an increase in the quantity of housing supplied 
• A decrease in rents, resulting in an increase in the quantity of housing supplied 

If there is a price ceiling set at P1, consumer surplus will be represented by the area:

• A, B, C 
• P2, B, P0 
• P3, B, P2 
• P3, A, C, P1 

The diagram depicts demand and supply curves in a city’s rental housing market. If a price ceiling of $1,000 is imposed on the market, which of the following will occur? 

• There will be a surplus of rental housing in the city. 
• The demand curve for housing will shift to the right. 
• The quantity of rental housing demanded will increase. 
• The supply curve for housing will shift to the right. 

When a price ceiling is imposed in a market:

• A persistent surplus results
• Sellers of the product are made better off
• A persistent shortage results
• Quantity supplied is greater than the quantity demanded