Honors Economics - Practice Midterm

An effective price floor set above equilibrium leads to a surplus because it raises the price, causing quantity supplied to exceed quantity demanded.

A price floor is a minimum price set by the government, preventing prices from falling below a certain level. Since $700 is a minimum price, it is a price floor.

Eliminating a rent ceiling allows landlords to raise rents. Higher rents attract more suppliers to the market, increasing the quantity of housing supplied, making this the most likely outcome.

When a price ceiling is set below the equilibrium price, it leads to a shortage because the quantity demanded exceeds the quantity supplied, resulting in not enough product available for consumers.

At equilibrium, the quantity demanded equals the quantity supplied, resulting in no surplus or shortage. This is the price point where the market is balanced.

A price ceiling is a maximum price that sellers can charge for a good, effectively setting an upper limit on the price. This prevents prices from rising above a certain level, which is why 'price ceiling' is the correct answer.

A price floor is the minimum price that buyers must pay for a good, acting as a lower limit. It prevents prices from falling below a certain level, unlike a price ceiling, which sets a maximum price.

A price ceiling is a maximum price set below equilibrium, leading to increased demand and decreased supply. This imbalance creates a shortage, as more consumers want the product than what is available.

A price floor sets a minimum price above equilibrium, leading to a surplus as quantity supplied exceeds quantity demanded at that price. Thus, the correct answer is surplus.

The curve represents supply, indicating the relationship between the price of a good and the quantity that producers are willing to sell. It shows how supply increases as prices rise.