Exam 8: Price Ceilings and Floors

Use the following to answer questions: Figure: Price Ceiling of Ps -(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

Use the following to answer questions: Figure: Supply and Demand 2 -(Figure: Supply and Demand 2) If the government sets the price at $8 in this figure, demanders are willing to pay ______ per unit for ______ units.

When the maximum price that can be legally charged is above the market price we say that there is a price floor.

One of the virtues of the market process is that it is open to new ideas, innovations, and:

Deregulation improves the allocation of resources by:

Ultimately, repealing the price controls on gasoline and oil:

When a price ceiling is in effect, quantity ______ will be greater than quantity ______, creating a ______.

A binding price ceiling leads to a(n):

Currently, the federal minimum wage is set at $7.25 per hour. A survey conducted by Newsweek magazine (June 27, 2011) indicated that many Americans would be willing to work for far less than the minimum wage-some as low as 25¢ per hour! What would happen if the U.S. government eliminated the minimum wage, and instead let wages be set by the marketplace?

Airlines in the United States were subject to ______ regulation from 1938 to 1978.

The minimum wage is an example of a(n):

After President Reagan repealed the price controls on gasoline:

A price floor is a legal maximum on the price of a good or service.

Which of the following events occurred during the 1973-1974 oil crisis in the United States?

In your city, it is illegal to charge more than a certain amount of money for an apartment. People have been signing leases for the highest legal amount, but also agreeing to pay a monthly bribe "on the side" to their landlord in order to get the apartment in the first place and to get timely maintenance. What is the effect of the bribes?

In situations of excess demand, sellers might decrease service levels when they are unable to raise prices because they wish to:

Use the following to answer questions: Figure: Price Ceilings and Consumer Valuation -Figure: Price Ceilings and Lost Consumer Surplus Refer to the figure. The figure measures the consumer surplus associated with a price ceiling, assuming:

Once one accounts for time costs and bribes, it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Use the following to answer questions: Figure: Price Ceilings and Consumer Valuation -(Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated only to the highest-value users, the total consumer surplus in the market would be:

Effective price ceilings cause misallocation of resources because scarce resources are usually not allocated to their highest-value uses.