Quiz on Price Control and Elasticity

What is a price ceiling?

• A legal minimum on the price at which a good can be sold

• A legal maximum on the price at which a good can be sold

• The price at which supply equals demand

• A tax imposed on a good

What happens when a price ceiling is set below the equilibrium price?

• A surplus occurs

• The market reaches equilibrium

• A shortage occurs

• Both supply and demand decrease

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

• Minimum wage laws

• Rent control

• Tax subsidies

• Import tariffs

What is a price floor?

• A legal minimum on the price at which a good can be sold

• A legal maximum on the price at which a good can be sold

• A tax imposed by the government

• The quantity of goods supplied exceeds demand

A price floor set above the equilibrium price will result in:

• Equilibrium

• A shortage

• A surplus

• Elasticity

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

• Rent control

• Minimum wage

• Subsidies for goods

• Sales tax

At equilibrium price:

• The price is too high, leading to surplus

• The price is too low, leading to shortage

• Quantity demanded equals quantity supplied

• The market fails to allocate resources efficiently

If the demand for a product increases, what is likely to happen to the equilibrium price?

• It will decrease

• It will remain the same

• It will increase

• It will fluctuate randomly

What is the primary role of prices in a free market?

• To create shortages

• To ration scarce resources efficiently

• To regulate government policies

• To establish tax revenues

When the price of a product increases and the total revenue decreases, the demand is:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly inelastic