Price Controls - DP Economics

In order to be effective, how must a price floor be set?

• Above the equilibrium price

• Below the equilibrium price

• At the equilibrium price

• It doesn't matter at what level it it set

Which of the following is a negative effect of a price floor?

• Shortage

• Surplus

• Lower prices

• Lower supply

Which of the following is an example of a price floor?

• Rent control

• University grants

• Agricultural price support

• None of these

In order to be effective, how must a price ceiling be set?

• Above the equilibrium price

• Below the equilibrium price

• At the equilibrium price

• It doesn't matter at what price it is set

Which of the following is a negative effect of a price ceiling?

• Surplus

• Lower demand

• Shortage

• Higher prices

Why would the government impose a price ceiling?

• To protect suppliers

• To discourage consumption

• To make goods more affordable

• To encourage production

Which of the following group of stakeholders is expected to have a gain in the market after the government imposes a price ceiling?

• Government

• Producers

• Consumers

• None

In the diagram shown, what is the size of the shortage/surplus that is created as a result of the price ceiling?

• Shortage, Q2 - Qe

• Surplus, Qe - Q1

• Surplus, Q2 - Q1

• Shortage, Q2 - Q1

On the diagram shown, what letter(s) identify the producer surplus after the price ceiling is implemented?

• d, e, f

• a, b, c

• f

• a, b, d

Using the diagram, what letter(s) identify the welfare loss that is created as a result of the price ceiling?

• a, b, c

• c, e

• b, d, c, e

• d, e, f