Question

In: Economics

26.    At the effective (binding) price ceiling:        a. quantity supplied exceeds quantity demanded          ...

26.    At the effective (binding) price ceiling:

       a. quantity supplied exceeds quantity demanded

          b. demand exceeds supply

          c. supply exceeds demand

          d. quantity demanded exceeds quantity supplied

27.    At the effective (binding) price ceiling

          a.   the price will remain constant because the market is in equilibrium.

          b.   the price will increase because there is an excess demand in the market.

          c.   the price will decrease because there is an excess supply in the market.

          d.   the price will remain constant because the price is set by the government.

29.     At an effective (binding) price floor:

       a. quantity supplied exceeds quantity demanded

          b. demand exceeds supply

          c. supply exceeds demand

          d. quantity demanded exceeds quantity supplied

30.     At an effective (binding) price floor

          a.   the price will remain constant because the market is in equilibrium.

          b.   the price will increase because there is an excess demand in the market.

          c.   the price will decrease because there is an excess supply in the market.

          d.   the price will remain constant because the price is set by the government.

Solutions

Expert Solution

27. At the effective (binding) price ceiling quantity demanded exceeds quantity supplied. This is due to the fact that the binding price ceiling is below the equilibrium price. At this price, the quantity demanded is always greater than the quantity supplied in the market.

28. At the effective (binding) price ceiling the price will remain constant because the price is set by the government. The price is set below the equilibrium price and is not allowed to go above the price ceiling which is binding and below the equilibrium price.

29. At an effective (binding) price floor quantity supplied exceeds quantity demanded. his is due to the fact that the binding price floor is above the equilibrium price. At this price, the quantity demanded is always less than the quantity supplied in the market. The consumer would want to buy less and at the same time seller would try to sell maximum to earn higher revenues.

30. At an effective (binding) price floor the price will remain constant because the price is set by the government. If the price was .not set by government, any excess supply would have resulted in fall in price.


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