Price ceiling and Price Floor

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

• Quantity demanded

• Quantity supplied.

• Indeterminate with the given information.

• Neither

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

• 120

• 100

• 80

• 60

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

• 5 million coats

• 4 million coats

• 3 million coats

• 2 million coats

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?

• 2 hours

• 3 hours

• 4 hours

• neither

Between 2000 and 2008, the price of oil increased from $30 per barrel to $140 per barrel, and the price of gasoline in the United States rose from about $1.50 per gallon to over $4.00 per gallon. Unlike in the 1970s when oil prices spiked, there were no long lines outside gas stations. Why?

• Government intervened to prevent lines

• Government intervened to enact gasoline rations

• There was no price control on gasoline at the time

Price controls distribute resources in many unintended ways. In the following cases below, who will probably spend more time waiting in line to get scarce, price-controlled goods? Choose one from each pair:

• Working people

• Retired people

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

• Fast food employees

• Ticket scalpers

• Construction workers

• Truck drivers

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?

• 5

• 40

If a government decided to impose price controls on gasoline, what could it do to avoid the time wasted waiting in lines? Though there are several solutions to this problem, only one of the options below is correct.

• Restrict gasoline consumption to high-value uses.

• Ban lines for gasoline.

• Create gasoline rations.

• Ban black markets for gasoline.

A review of the jargon: Is the minimum wage a “price ceiling” or a “price floor?

• price ceiling

• price floor