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Subjective Short Answer
1. Define a price ceiling.
2. When a price ceiling is binding, is the price ceiling set above or below the market equilibrium price?
3. Does a binding price ceiling result in a shortage or a surplus in the market?
4. Define a price floor.
5. When a price floor is binding, is the price floor set above or below the market equilibrium price?
6. Will a binding price floor result in a shortage or a surplus in the market?
Figure 6-31
7. Refer to Figure 6-31. If the government set a price ceiling at $9, would there be a shortage or surplus, and how large
would be the shortage/surplus?
8. Refer to Figure 6-31. If the government set a price ceiling at $15, would there be a shortage or surplus, and how large
would be the shortage/surplus?
9. Refer to Figure 6-31. If the government set a price ceiling at $8, would there be a shortage or surplus, and how large
would be the shortage/surplus?
10. Refer to Figure 6-31. If the government set a price floor at $15, would there be a shortage or surplus, and how large
would be the shortage/surplus?
11. Refer to Figure 6-31. If the government set a price floor at $9, would there be a shortage or surplus, and how large
would be the shortage/surplus?
12. Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large
would be the shortage/surplus?
Figure 6-32
13. Refer to Figure 6-32. If the government set a price ceiling at $40, would there be a shortage or surplus, and how large
would be the shortage/surplus?
14. Refer to Figure 6-32. If the government set a price ceiling at $80, would there be a shortage or surplus, and how large
would be the shortage/surplus?
15. Refer to Figure 6-32. If the government set a price ceiling at $50, would there be a shortage or surplus, and how large
would be the shortage/surplus?
16. Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large
would be the shortage/surplus?
17. Refer to Figure 6-32. If the government set a price floor at $55, would there be a shortage or surplus, and how large
would be the shortage/surplus?
Scenario 6-1
Suppose that demand in the market for good X is given by the equation
and that supply in the market for good X is given by the equation
18. Refer to Scenario 6-1. What are the equilibrium price and quantity in the market for good X?
19. Refer to Scenario 6-1. If the government set a price ceiling at $8, would there be a shortage or surplus, and how large
would be the shortage/surplus?
20. Refer to Scenario 6-1. If the government set a price ceiling at $12, would there be a shortage or surplus, and how
large would be the shortage/surplus?
21. Refer to Scenario 6-1. If the government set a price floor at $13, would there be a shortage or surplus, and how large
would be the shortage/surplus?
22. Refer to Scenario 6-1. If the government set a price floor at $7, would there be a shortage or surplus, and how large
would be the shortage/surplus?
Scenario 6-2
Suppose demand for a product is given by the equation
and supply for the product is given by the equation
23. Refer to Scenario 6-2. What are the equilibrium price and equilibrium quantity in the market for this product?
24. Refer to Scenario 6-2. Suppose the government sets a price ceiling at $12 for this product. Is this price ceiling
binding, and what will be the size of the shortage/surplus in this market?
25. Refer to Scenario 6-2. Suppose the government sets a price ceiling at $17 for this product. Is this price ceiling
binding, and what will be the size of the shortage/surplus in this market?
26. Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Is this price floor binding,
and what will be the size of the shortage/surplus in this market?
27. Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Initially, is this price floor
binding? Suppose that for some reason demand were to decrease to
Would the $13 price floor be binding after the shift in the demand curve? If so, what is the size of the resulting
shortage/surplus?
28. The following table shows the demand and supply schedules in a particular market.
Price
Quantity
Demanded
Quantity
Supplied
$1
8
3
$3
6
6
$5
4
9
$7
2
12
$9
0
15
If the government sets a price floor $2 above the equilibrium price, how many units will be sold in this market?
Table 6-6
Price ($)
Quantity
Demanded
Quantity
Supplied
0
21
0
1
18
4
2
15
8
3
12
12
4
9
16
5
6
20
6
3
24
7
0
28
29. Refer to Table 6-6. If the government set a price ceiling at $2, would there be a shortage or surplus, and how large
would be the shortage/surplus?
30. Refer to Table 6-6. If the government set a price ceiling at $4, would there be a shortage or surplus, and how large
would be the shortage/surplus?
31. Refer to Table 6-6. If the government set a price floor at $4, would there be a shortage or surplus, and how large
would be the shortage/surplus?
32. Refer to Table 6-6. If the government set a price floor at $2, would there be a shortage or surplus, and how large
would be the shortage/surplus?
33. Refer to Table 6-6. In this market, over what range of prices would a price ceiling set by the government be binding?
34. Refer to Table 6-6. In this market, over what range of prices would a price floor set by the government be binding?
Figure 6-33
35. Refer to Figure 6-33. Suppose a $3 per-unit tax is imposed on the sellers of this good. What price will buyers pay for
the good after the tax is imposed?
36. Refer to Figure 6-33. Suppose a $3 per-unit tax is imposed on the sellers of this good. How much is the burden of this
tax on the buyers in this market?
37. Refer to Figure 6-33. Suppose a $3 per-unit tax is imposed on the sellers of this good. What is the effective price that
sellers will receive for the good after the tax is imposed?
38. Refer to Figure 6-33. Suppose a $3 per-unit tax is imposed on the sellers of this good. How much is the burden of this
tax on the sellers in this market?
Figure 6-34
40. Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how many units will be bought
and sold in the market after the tax is imposed?
41. Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much will sellers receive per
unit after the tax is imposed?
42. Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, what price will buyers pay per
unit after the tax is imposed?
43. Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax
on the buyers in this market?
44. Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax
on the sellers in this market?
45. Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, who will bear the greater burden
of the tax - the buyers, the sellers, or will the burden be shared equally?
46. In a particular market, market demand is given by the equation
and market supply is given by the equation
Suppose a per-unit tax is imposed that reduces the number of units bought and sold in the market to 25 units. What is the
size of the tax, and who bears the greater burden of the tax, buyers or sellers?
47. If the demand curve is more price elastic than the supply curve in a particular market, will the buyers or the sellers
bear a larger burden of a per-unit tax imposed on the market?
48. If the supply curve is more price elastic than the demand curve in a particular market, will the buyers or the sellers
bear a larger burden of a per-unit tax imposed on the market?
49. If the demand curve is more price elastic than the supply curve, will the buyers or the sellers bear a greater burden of a
tax? Draw a diagram to illustrate your answer.
50. If the supply curve is more price elastic than the demand curve, will the buyers or the sellers bear a greater burden of a
tax? Draw a diagram to illustrate your answer.
51. Using a supply and demand diagram, show a labor market with a binding minimum wage. Use the diagram to show
those who are helped by the minimum wage and those who are hurt by the minimum wage.
52.
a.
Using the graph shown, analyze the effect a $300 price ceiling would have on the
market for ten-speed bicycles. Would this be a binding price ceiling?
b.
Using the graph shown, analyze the effect a $700 price floor would have on this
market for ten-speed bicycles. Would this be a binding price floor?
c.
Why would policymakers choose to impose a price ceiling or price floor?
53. Using the graph shown, answer the following questions.
a.
What was the equilibrium price in this market before the tax?
b.
What is the amount of the tax?
c.
How much of the tax will the buyers pay?
d.
How much of the tax will the sellers pay?
e.
How much will the buyer pay for the product after the tax is imposed?
f.
How much will the seller receive after the tax is imposed?
g.
As a result of the tax, what has happened to the level of market activity?
54. Using the graph shown, answer the following questions.
a.
What was the equilibrium price in this market before the tax?
b.
What is the amount of the tax?
c.
How much of the tax will the buyers pay?
d.
How much of the tax will the sellers pay?
e.
How much will the buyer pay for the product after the tax is imposed?
f.
How much will the seller receive after the tax is imposed?
g.
As a result of the tax, what has happened to the level of market activity?
55. Using the graph shown, in which the vertical distance between points A and B represents the tax in the market, answer
the following questions.
a.
What was the equilibrium price and quantity in this market before the tax?
b.
What is the amount of the tax?
c.
How much of the tax will the buyers pay?
d.
How much of the tax will the sellers pay?
e.
How much will the buyer pay for the product after the tax is imposed?
f.
How much will the seller receive after the tax is imposed?
g.
As a result of the tax, what has happened to the level of market activity?
56. How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.
