Exam 8: Price Ceilings and Floors

Figure: Airline Industry Refer to the figure. Suppose that airlines are regulated and prices are kept above the market level. According to the figure, the areas A and B represent, respectively, the:

Why do many consumers and politicians advocate for price controls?

What do price ceilings NOT cause?

Under a policy of rent control, the short-run shortage ______ the long-run shortage.

Rent controls are:

Use the following to answer questions: Figure: Costs of Price Ceilings -(Figure: Costs of Price Ceilings) Refer to the figure. What is the dollar amount of the value of wasted time if a price ceiling of $4 is implemented?

New housing takes some time to build, so rent control creates larger shortages in the:

Price ceilings cause the quantity demanded to be less than the quantity supplied.

Minimum wage laws cause ______ low-skilled employment.

Regulation of airline fares under the Civil Aeronautics Board:

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT:

Minimum wage laws are sometimes a price floor and sometimes a price ceiling.

When price ceilings are effective, gains from trade are usually lower than if the available goods are allocated to the highest value uses.

A price floor causes:

Which statement(s) about price ceilings are TRUE? I. Price ceilings cause quantity demanded to exceed quantity supplied. II. When including time costs and bribes, consumers pay a total price in excess of the price ceiling. III. All else equal, it is more wasteful to allocate goods based on bribes than on waiting time costs.

Specify the argument in favor of rent controls and the arguments against rent controls. Explain what other possible policies can create affordable housing.

Rent controls create all of the following EXCEPT:

Use the following to answer questions: Figure: Water Market -(Figure: Water Market) Refer to the figure. If a price floor in the diagram gets set at $8 a gallon, what is the quality waste?

Which events occurred during the 1973-1974 oil crisis in the United States? I. Gas stations were ordered to be closed between 9 PM on Saturday and 12:01 AM on Monday. II. The government decided to allocate oil by command. III. The 55 mph speed limit was repealed. IV. Daylight savings time was implemented.

Price ceilings would create all of the following effects EXCEPT: