Exam 5: Market in Motion and Price Controls

If a price floor is not binding, then it will have no effect on the market.

Exhibit 5-1 ​ ​ ​ -Refer to Exhibit 5-1. A price floor set at $40 would create a surplus of 30 units.

A government mandated price increase for doodads will:

If a price floor is not binding, then

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

If the quantity of a good exchanged decreased,

If consumers expected the price of a good to increase in the near future and the price of a complement good decreased at the same time, as a result:

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price ceiling imposed at $3 per thousand cubic feet. That price ceiling is then lowered to $2 per thousand cubic feet. As a result,

If you observed that the market price of a good rose, while the quantity exchanged fell, which of the following could have caused the change?

Ceteris paribus, if the market supply of a product increases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.

If buyers expected the future price of a good to decrease, it would tend to increase the current quantity exchanged.

Assume a price ceiling is imposed at the current equilibrium price in the market for wheat. If the supply of wheat then decreases as a result of bad weather,

Which of the following changes would tend to both decrease the quantity of a good traded and increase the price?

An increase in the equilibrium price and the equilibrium quantity would be caused by an increase in demand.

Suppose the equilibrium price of bread is $2.00 per loaf. If the government sets a price ceiling of $1.50 per loaf:

If input prices rose and production technology improved at the same time, as a result: larger quantities to be exchanged.

A decrease in supply will cause a surplus at the original market price.

When a demand curve shifts, both the equilibrium price and quantity traded will change in the same direction as a result.

A leftward shift of the demand curve results in:

If both market demand and supply increase simultaneously, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.