Chapter 6 Supply, Demand, and Government Policies
MULTIPLE CHOICE
1. Which of the following is not correct?
a.
Economists have two roles: scientist and policy adviser.
b.
As scientists, economists develop and test theories to explain the world around them.
c.
Economic policies rarely have effects that their architects did not intend or anticipate.
d.
As policy advisers, economists use their theories to help change the world for the better.
2. Which of the following is not an example of a public policy?
a.
rent-control laws
b.
minimum-wage laws
c.
taxes
d.
equilibrium laws
3. Rent-control laws dictate
a.
the exact rent that landlords must charge tenants.
b.
a maximum rent that landlords may charge tenants.
c.
a minimum rent that landlords may charge tenants.
d.
both a minimum rent and a maximum rent that landlords may charge tenants.
4. Minimum-wage laws dictate
a.
the exact wage that firms must pay workers.
b.
a maximum wage that firms may pay workers.
c.
a minimum wage that firms may pay workers.
d.
both a minimum wage and a maximum wage that firms may pay workers.
5. Price controls are usually enacted
a.
as a means of raising revenue for public purposes.
b.
when policymakers believe that the market price of a good or service is unfair to buyers or sellers.
c.
when policymakers detect inefficiencies in a market.
d.
All of the above are correct.
2 ❖ Chapter 6/Supply, Demand, and Government Policies
6. The presence of a price control in a market for a good or service usually is an indication that
a.
an insufficient quantity of the good or service was being produced in that market to meet the
public’s need.
b.
the usual forces of supply and demand were not able to establish an equilibrium price in that
market.
c.
policymakers believed that the price that prevailed in that market in the absence of price controls
was unfair to buyers or sellers.
d.
policymakers correctly believed that price controls would generate no inequities of their own once
imposed.
7. Price controls
a.
always produce a fair outcome.
b.
always produce an efficient outcome.
c.
can generate inequities of their own.
d.
All of the above are correct.
8. Policymakers use taxes
a.
to raise revenue for public purposes but not to influence market outcomes.
b.
both to raise revenue for public purposes and to influence market outcomes.
c.
when they realize that price controls alone are insufficient to correct market inequities.
d.
only in those markets in which the burden of the tax falls clearly on the sellers.
CONTROLS ON PRICES
1. In a competitive market free of government regulation,
a.
price adjusts until quantity demanded is greater than quantity supplied.
b.
price adjusts until quantity demanded is less than quantity supplied.
c.
price adjusts until quantity demanded equals quantity supplied.
d.
supply adjusts to meet demand at every price.
2. In a free, competitive market, what is the rationing mechanism?
a.
seller bias
b.
buyer bias
c.
government law
d.
price
Chapter 6/Supply, Demand, And Government Policies ❖ 3
3. Which of the following is not a function of prices in a market system?
a.
Prices have the crucial job of balancing supply and demand.
b.
Prices send signals to buyers and sellers to help them make rational economic decisions.
c.
Prices coordinate economic activity.
d.
Prices ensure an equal distribution of goods and services among consumers.
4. A legal maximum on the price at which a good can be sold is called a price
a.
floor.
b.
subsidy.
c.
support.
d.
ceiling.
5. A price ceiling is
a.
often imposed on markets in which “cutthroat competition” would prevail without a price ceiling.
b.
a legal maximum on the price at which a good can be sold.
c.
often imposed when sellers of a good are successful in their attempts to convince the government
that the market outcome is unfair without a price ceiling.
d.
All of the above are correct.
6. Which of the following is the most likely explanation for the imposition of a price ceiling on the market for
milk?
a.
Policymakers have studied the effects of the price ceiling carefully, and they recognize that the
price ceiling is advantageous for society as a whole.
b.
Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers
into imposing the price ceiling.
c.
Sellers of milk, recognizing that the price ceiling is good for them, have pressured policymakers
into imposing the price ceiling.
d.
Buyers and sellers of milk have agreed that the price ceiling is good for both of them and have
therefore pressured policymakers into imposing the price ceiling.
7. If a price ceiling is not binding, then
a.
the equilibrium price is above the price ceiling.
b.
the equilibrium price is below the price ceiling.
c.
it has no legal enforcement mechanism.
d.
None of the above is correct because all price ceilings must be binding.
4 ❖ Chapter 6/Supply, Demand, and Government Policies
8. If a price ceiling is not binding, then
a.
there will be a surplus in the market.
b.
there will be a shortage in the market.
c.
the market will be less efficient than it would be without the price ceiling.
d.
there will be no effect on the market price or quantity sold.
9. If a nonbinding price ceiling is imposed on a market, then the
a.
quantity sold in the market will decrease.
b.
quantity sold in the market will stay the same.
c.
price in the market will increase.
d.
price in the market will decrease.
10. A price ceiling will be binding only if it is set
a.
equal to the equilibrium price.
b.
above the equilibrium price.
c.
below the equilibrium price.
d.
either above or below the equilibrium price.
11. 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,
a.
a smaller quantity of the good is bought and sold.
b.
a smaller quantity of the good is demanded.
c.
a larger quantity of the good is supplied.
d.
the price rises above the previous equilibrium.
12. Suppose the government has imposed a price ceiling on laptop computers. Which of the following events
could transform the price ceiling from one that is not binding into one that is binding?
a.
Improvements in production technology reduce the costs of producing laptop computers.
b.
The number of firms selling laptop computers decreases.
c.
Consumers’ income decreases, and laptop computers are a normal good.
d.
The number of consumers buying laptop computers decreases.
13. Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could
transform the price ceiling from one that is binding to one that is not binding?
a.
Cellular phones become more popular.
b.
Traditional land line phones become more expensive.
c.
The components used to produce cellular phones become more expensive.
d.
A technological advance makes cellular phone production less expensive.
Chapter 6/Supply, Demand, And Government Policies ❖ 5
14. If the government removes a binding price ceiling from a market, then the price paid by buyers will
a.
increase, and the quantity sold in the market will increase.
b.
increase, and the quantity sold in the market will decrease.
c.
decrease, and the quantity sold in the market will increase.
d.
decrease, and the quantity sold in the market will decrease.
15. If the government removes a binding price ceiling from a market, then the price received by sellers will
a.
decrease, and the quantity sold in the market will decrease.
b.
decrease, and the quantity sold in the market will increase.
c.
increase, and the quantity sold in the market will decrease.
d.
increase, and the quantity sold in the market will increase.
16. When a binding price ceiling is imposed on a market,
a.
price no longer serves as a rationing device.
b.
the quantity supplied at the price ceiling exceeds the quantity that would have been supplied
without the price ceiling.
c.
all buyers benefit.
d.
All of the above are correct.
17. When a binding price ceiling is imposed on a market to benefit buyers,
a.
no buyers actually benefit.
b.
some buyers benefit, but no buyers are harmed.
c.
some buyers benefit, and some buyers are harmed.
d.
all buyers benefit.
18. Which of the following would be the least likely result of a binding price ceiling imposed on the market for
rental cars?
a.
an accumulation of dirt in the interior of rental cars
b.
poor engine maintenance in rental cars
c.
free gasoline given to people as an incentive to a rent a car
d.
slow replacement of old rental cars with newer ones
19. Which of the following would be the most likely result of a binding price ceiling imposed on the market for
rental cars?
a.
frequent rental programs such as “Rent nine times and the tenth rental is free!”
b.
enhanced maintenance programs to promote the high quality of the cars
c.
free gasoline given to people as an incentive to a rent a car
d.
slow replacement of old rental cars with newer ones
6 ❖ Chapter 6/Supply, Demand, and Government Policies
20. A price ceiling is binding when it is set
a.
above the equilibrium price, causing a shortage.
b.
above the equilibrium price, causing a surplus.
c.
below the equilibrium price, causing a shortage.
d.
below the equilibrium price, causing a surplus.
21. A binding price ceiling
(i)
causes a surplus.
(ii)
causes a shortage.
(iii)
is set at a price above the equilibrium price.
(iv)
is set at a price below the equilibrium price.
a.
(ii) only
b.
(iv) only
c.
(i) and (iii) only
d.
(ii) and (iv) only
22. A nonbinding price ceiling
(i)
causes a surplus.
(ii)
causes a shortage.
(iii)
is set at a price above the equilibrium price.
(iv)
is set at a price below the equilibrium price.
a.
(i) only
b.
(iii) only
c.
(i) and (iii) only
d.
(ii) and (iv) only
23. To say that a price ceiling is binding is to say that the price ceiling
a.
results in a surplus.
b.
is set above the equilibrium price.
c.
causes quantity demanded to exceed quantity supplied.
d.
All of the above are correct.
24. To say that a price ceiling is nonbinding is to say that the price ceiling
a.
results in a surplus.
b.
is set above the equilibrium price.
c.
causes quantity demanded to exceed quantity supplied.
d.
All of the above are correct.
Chapter 6/Supply, Demand, And Government Policies ❖ 7
25. A shortage results when a
a.
nonbinding price ceiling is imposed on a market.
b.
nonbinding price ceiling is removed from a market.
c.
binding price ceiling is imposed on a market.
d.
binding price ceiling is removed from a market.
26. The imposition of a binding price ceiling on a market causes quantity demanded to be
a.
greater than quantity supplied.
b.
less than quantity supplied.
c.
equal to quantity supplied.
d.
Both a) and b) are possible.
27. If a price ceiling is a binding constraint on a market, then
a.
the equilibrium price must be below the price ceiling.
b.
the quantity supplied must exceed the quantity demanded.
c.
sellers cannot sell all they want to sell at the price ceiling.
d.
buyers cannot buy all they want to buy at the price ceiling.
28. Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling
on the market for in-home treadmills. As a result,
a.
the demand for treadmills will increase.
b.
the supply of treadmills will decrease.
c.
a shortage of treadmills will develop.
d.
All of the above are correct.
29. If a binding price ceiling is imposed on the baby formula market, then
a.
the quantity of baby formula demanded will increase.
b.
the quantity of baby formula supplied will decrease.
c.
a shortage of baby formula will develop.
d.
All of the above are correct.
30. Suppose the equilibrium price of a physical examination (“physical”) by a doctor is $200, and the government
imposes a price ceiling of $150 per physical. As a result of the price ceiling, the
a.
demand curve for physicals shifts to the right.
b.
supply curve for physicals shifts to the left.
c.
quantity demanded of physicals increases, and the quantity supplied of physicals decreases.
d.
number of physicals performed stays the same.
8 ❖ Chapter 6/Supply, Demand, and Government Policies
31. When a binding price ceiling is imposed on a market to benefit buyers,
a.
every buyer in the market benefits.
b.
every buyer and seller in the market benefits.
c.
every buyer who wants to buy the good will be able to do so, but only if he waits in long lines.
d.
some buyers will not be able to buy any amount of the good.
32. In response to a shortage caused by the imposition of a binding price ceiling on a market,
a.
price will no longer be the mechanism that rations scarce resources.
b.
long lines of buyers may develop.
c.
sellers could ration the good or service according to their own personal biases.
d.
All of the above are correct.
Figure 6-1
Panel (a)
Panel (b)
D
S
price ceiling
quantity
price
quantity
price
33. Refer to Figure 6-1. A binding price ceiling is shown in
a.
panel (a) only.
b.
panel (b) only.
c.
both panel (a) and panel (b).
d.
neither panel (a) nor panel (b).
Chapter 6/Supply, Demand, And Government Policies ❖ 9
34. Refer to Figure 6-1. In which panel(s) of the figure would there be a shortage of the good at the price ceil-
ing?
a.
panel (a) only
b.
panel (b) only
c.
both panel (a) and panel (b)
d.
neither panel (a) nor panel (b)
35. Refer to Figure 6-1. The price ceiling shown in panel (a)
a.
is not binding.
b.
creates a surplus.
c.
creates a shortage.
d.
Both a) and b) are correct.
36. Refer to Figure 6-1. The price ceiling shown in panel (b)
a.
is not binding.
b.
creates a surplus.
c.
creates a shortage.
d.
Both a) and b) are correct.
Figure 6-2
Price ceiling
Demand
Supply
80 165
60 120 180 Quantity
1
2
3
4
5
6
Price
37. Refer to Figure 6-2. The price ceiling
a.
is binding.
b.
causes a shortage.
c.
causes the quantity demanded to exceed the quantity supplied.
d.
All of the above are correct.
10 ❖ Chapter 6/Supply, Demand, and Government Policies
38. Refer to Figure 6-2. The price ceiling
a.
causes a shortage of 45 units of the good.
b.
makes it necessary for sellers to ration the good.
c.
is not binding because it is set below the equilibrium price.
d.
Both a) and b) are correct.
39. Refer to Figure 6-2. The price ceiling causes a
a.
surplus of 40 units.
b.
surplus of 85 units.
c.
shortage of 45 units.
d.
shortage of 85 units.
40. Refer to Figure 6-2. The price ceiling causes quantity
a.
supplied to exceed quantity demanded by 45 units.
b.
supplied to exceed quantity demanded by 85 units.
c.
demanded to exceed quantity supplied by 45 units.
d.
demanded to exceed quantity supplied by 85 units.
41. A legal minimum on the price at which a good can be sold is called a price
a.
subsidy.
b.
floor.
c.
support.
d.
ceiling.
42. A price floor is
a.
a legal minimum on the price at which a good can be sold.
b.
often imposed when sellers of a good are successful in their attempts to convince the government
that the market outcome is unfair without a price floor.
c.
a source of inefficiency in a market.
d.
All of the above are correct.
Chapter 6/Supply, Demand, And Government Policies ❖ 11
43. Which of the following is the most likely explanation for the imposition of a price floor on the market for
corn?
a.
Policymakers have studied the effects of the price floor carefully, and they recognize that the price
floor is advantageous for society as a whole.
b.
Buyers and sellers of corn have agreed that the price floor is good for both of them and have
therefore pressured policy makers into imposing the price floor.
c.
Buyers of corn, recognizing that the price floor is good for them, have pressured policymakers into
imposing the price floor.
d.
Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into
imposing the price floor.
44. If a price floor is not binding, then
a.
the equilibrium price is above the price floor.
b.
the equilibrium price is below the price floor.
c.
there will be a surplus in the market.
d.
Both a) and c) are correct.
45. If a price floor is not binding, then
a.
there will be a surplus in the market.
b.
there will be a shortage in the market.
c.
there will be no effect on the market price or quantity sold.
d.
the market will be less efficient than it would be without the price floor.
46. If a nonbinding price floor is imposed on a market, then the
a.
quantity sold in the market will decrease.
b.
quantity sold in the market will stay the same.
c.
price in the market will increase.
d.
price in the market will decrease.
47. A binding price floor
(i)
causes a surplus.
(ii)
causes a shortage.
(iii)
is set at a price above the equilibrium price.
(iv)
is set at a price below the equilibrium price.
a.
(i) only
b.
(iii) only
c.
(i) and (iii) only
d.
(ii) and (iv) only
12 ❖ Chapter 6/Supply, Demand, and Government Policies
48. A nonbinding price floor
(i)
causes a surplus.
(ii)
causes a shortage.
(iii)
is set at a price above the equilibrium price.
(iv)
is set at a price below the equilibrium price.
a.
(iii) only
b.
(iv) only
c.
(i) and (iii) only
d.
(ii) and (iv) only
49. A price floor will be binding only if it is set
a.
equal to the equilibrium price.
b.
above the equilibrium price.
c.
below the equilibrium price.
d.
either above or below the equilibrium price.
50. After a binding price floor becomes effective, a
a.
smaller quantity of the good is bought and sold.
b.
a larger quantity of the good is demanded.
c.
a smaller quantity of the good is supplied.
d.
All of the above are correct.
51. Suppose the government has imposed a price floor on the market for soybeans. Which of the following events
could transform the price floor from one that is not binding into one that is binding?
a.
Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans.
b.
The number of farmers selling soybeans decreases.
c.
Consumers’ income increases, and soybeans are a normal good.
d.
The number of consumers buying soybeans increases.
52. Suppose the government has imposed a price floor on cellular phones. Which of the following events could
transform the price floor from one that is binding to one that is not binding?
a.
Cellular phones become less popular.
b.
Traditional land line phones become more expensive.
c.
The components used to produce cellular phones become less expensive.
d.
Firms expect the price of cellular phones to fall in the future.
Chapter 6/Supply, Demand, And Government Policies ❖ 13
53. If the government removes a binding price floor from a market, then the price paid by buyers will
a.
increase, and the quantity sold in the market will increase.
b.
increase, and the quantity sold in the market will decrease.
c.
decrease, and the quantity sold in the market will increase.
d.
decrease, and the quantity sold in the market will decrease.
54. If the government removes a binding price floor from a market, then the price received by sellers will
a.
decrease, and the quantity sold in the market will decrease.
b.
decrease, and the quantity sold in the market will increase.
c.
increase, and the quantity sold in the market will decrease.
d.
increase, and the quantity sold in the market will increase.
55. When a binding price floor is imposed on a market,
a.
price no longer serves as a rationing device.
b.
the quantity supplied at the price floor exceeds the quantity that would have been supplied without
the price floor.
c.
only some sellers benefit.
d.
All of the above are correct.
56. When a binding price floor is imposed on a market,
a.
price no longer serves as a rationing device.
b.
the quantity demanded at the price floor exceeds the quantity that would have been demanded
without the price floor.
c.
all sellers benefit.
d.
All of the above are correct.
57. When a binding price floor is imposed on a market to benefit sellers,
a.
no sellers actually benefit.
b.
some sellers benefit, but no sellers are harmed.
c.
some sellers benefit, and some sellers are harmed.
d.
all sellers benefit.
58. A price floor is binding when it is set
a.
above the equilibrium price, causing a shortage.
b.
above the equilibrium price, causing a surplus.
c.
below the equilibrium price, causing a shortage.
d.
below the equilibrium price, causing a surplus.
14 ❖ Chapter 6/Supply, Demand, and Government Policies
59. To say that a price floor is binding is to say that the price floor
a.
results in a shortage.
b.
is set below the equilibrium price.
c.
causes quantity supplied to exceed quantity demanded.
d.
All of the above are correct.
60. A surplus results when a
a.
nonbinding price floor is imposed on a market.
b.
nonbinding price floor is removed from a market.
c.
binding price floor is imposed on a market.
d.
binding price floor is removed from a market.
61. The imposition of a binding price floor on a market causes quantity demanded to be
a.
greater than quantity supplied.
b.
less than quantity supplied.
c.
equal to quantity supplied.
d.
Both a) and b) are possible.
62. If a price floor is a binding constraint on a market, then
a.
the equilibrium price must be above the price floor.
b.
the quantity demanded must exceed the quantity supplied.
c.
sellers cannot sell all they want to sell at the price floor.
d.
buyers cannot buy all they want to buy at the price floor.
63. If a binding price floor is imposed on the video game market, then
a.
the demand for video games will decrease.
b.
the supply of video games will increase.
c.
a surplus of video games will develop.
d.
All of the above are correct.
64. If a binding price floor is imposed on the video game market, then
a.
the quantity of video games demanded will decrease.
b.
the quantity of video games supplied will increase.
c.
a surplus of video games will develop.
d.
All of the above are correct.
Chapter 6/Supply, Demand, And Government Policies ❖ 15
65. Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per
tube. As a result of the price floor, the
a.
demand curve for toothpaste shifts to the left.
b.
supply curve for toothpaste shifts to the right.
c.
quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply
increases.
d.
quantity supplied of toothpaste stays the same.
66. When a binding price floor is imposed on a market to benefit sellers,
a.
every seller in the market benefits.
b.
all buyers and sellers benefit.
c.
every seller who wants to sell the good will be able to do so, but only if he appeals to the personal
biases of the buyers.
d.
some sellers will not be able to sell any amount of the good.
67. A binding price floor will reduce a firm’s total revenue
a.
always.
b.
when demand is elastic.
c.
when demand is inelastic.
d.
never.
16 ❖ Chapter 6/Supply, Demand, and Government Policies
Figure 6-3
Panel (a)
Panel (b)
quantity
D
S
price floor
price of wheat
quantity
68. Refer to Figure 6-3. A binding price floor is shown in
a.
both panel (a) and panel (b).
b.
panel (a) only.
c.
panel (b) only.
d.
neither panel (a) nor panel (b).
69. Refer to Figure 6-3. A nonbinding price floor is shown in
a.
both panel (a) and panel (b).
b.
panel (a) only.
c.
panel (b) only.
d.
neither panel (a) nor panel (b).
70. Refer to Figure 6-3. In panel (b), there will be
a.
a shortage of wheat.
b.
equilibrium in the market.
c.
a surplus of wheat.
d.
lines of people waiting to buy wheat.
Chapter 6/Supply, Demand, And Government Policies ❖ 17
71. Refer to Figure 6-3. In panel (a), there will be
a.
a shortage of wheat.
b.
equilibrium in the market.
c.
a surplus of wheat.
d.
lines of people waiting to buy wheat.
72. An outcome that can result from either a price ceiling or a price floor is
a.
a surplus in the market.
b.
a shortage in the market.
c.
a nonbinding price control.
d.
long lines of frustrated buyers.
73. An outcome that can result from either a price ceiling or a price floor is
a.
an enhancement of efficiency.
b.
undesirable rationing mechanisms.
c.
a surplus.
d.
a shortage.
74. Price ceilings and price floors that are binding
a.
are desirable because they make markets more efficient and more fair.
b.
cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.
c.
can have the effect of restoring a market to equilibrium.
d.
are imposed because they can make the poor in the economy better off without causing adverse
effects.
75. When government imposes a price ceiling or a price floor on a market,
a.
price no longer serves as a rationing device.
b.
efficiency in the market is enhanced.
c.
shortages and surpluses are eliminated.
d.
both buyers and sellers become better off.
18 ❖ Chapter 6/Supply, Demand, and Government Policies
76. You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country
of Sylvania has cut off all exports of oranges to Freedonia. Harpo, who is one of your advisors, suggests that
you should impose a binding price ceiling in order to avoid a shortage of oranges. Chico, another one of your
advisors, argues that without a binding price floor, a shortage will certainly develop. Zeppo, a third advisor,
says that the best way to avoid a shortage of oranges is to take no action at all. Which of your three advisors is
most likely to have studied economics?
a.
Harpo
b.
Chico
c.
Zeppo
d.
Apparently, all three advisors have studied economics, but their views on positive economics are
different.
77. When policymakers set prices by legal decree, they
a.
are usually following the advice of mainstream economists.
b.
improve the organization of economic activity.
c.
obscure the signals that normally guide the allocation of society’s resources.
d.
are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.
78. Consider the market for watermelons. Buyers
a.
and sellers would lobby for a price ceiling.
b.
and sellers would lobby for a price floor.
c.
would lobby for a price ceiling, whereas sellers would lobby for a price floor.
d.
would lobby for a price floor, whereas sellers would lobby for a price ceiling.
Chapter 6/Supply, Demand, And Government Policies ❖ 19
Figure 6-4
Demand
Supply
2 4 6 8 10 12 14 16 18 20 Quantity
2
4
6
8
10
12
14
16
18
20 Price
79. Refer to Figure 6-4. Which of the following statements is not correct?
a.
When the price is $10, quantity supplied equals quantity demanded.
b.
When the price is $6, there is a surplus of 8 units.
c.
When the price is $12, there is a surplus of 4 units.
d.
When the price is $16, quantity supplied exceeds quantity demanded by 12 units.
80. Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a
(i)
binding price ceiling.
(ii)
non-binding price ceiling.
(iii)
binding price floor.
(iv)
non-binding price floor.
a.
(i) only
b.
(ii) only
c.
(i) and (iv) only
d.
(ii) and (iii) only
81. Refer to Figure 6-4. A government-imposed price of $16 in this market could be an example of a
(i)
binding price ceiling.
(ii)
non-binding price ceiling.
(iii)
binding price floor.
(iv)
non-binding price floor.
a.
(i) only
b.
(ii) only
c.
(i) and (iv) only
d.
(ii) and (iii) only
20 ❖ Chapter 6/Supply, Demand, and Government Policies
82. Refer to Figure 6-4. A government-imposed price of $12 in this market is an example of a
a.
binding price ceiling that creates a shortage.
b.
non-binding price ceiling that creates a shortage.
c.
binding price floor that creates a surplus.
d.
non-binding price floor that creates a surplus.
83. Refer to Figure 6-4. A government-imposed price of $6 in this market is an example of a
a.
binding price ceiling that creates a shortage.
b.
non-binding price ceiling that creates a shortage.
c.
binding price floor that creates a surplus.
d.
non-binding price floor that creates a surplus.
Figure 6-5
Demand
Supply
70 160
60 120 180 Quantity
2
4
6
8
10
12 Price
84. Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling is
a.
binding and creates a surplus of 40 units of the good.
b.
binding and creates a surplus of 90 units of the good.
c.
not binding but creates a surplus of 40 units of the good.
d.
not binding, and there will be no surplus or shortage of the good.
85. Refer to Figure 6-5. If the horizontal line on the graph represents a price floor, then the price floor is
a.
binding and creates a shortage of 40 units of the good.
b.
binding and creates a surplus of 50 units of the good.
c.
binding and creates a surplus of 90 units of the good.
d.
not binding but creates a surplus of 40 units of the good.