How do producers who are subject to a binding price ceiling respond as the time frame...

How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

a	Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic.

b	Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes less elastic.

c	There are no changes, and elasticity of supply remains unchanged.

d	Producers are less willing to substitute away from producing the good, and their elasticity of supply becomes less elastic.

e	Producers are less willing to substitute away from the good, and their elasticity of supply becomes more elastic.

A binding minimum wage will decrease the income of

a	all workers.

b	only those workers in jobs that would normally pay more than minimum wage.

c	no workers.

d	only those workers in jobs that would normally pay less than minimum wage.

e	potential workers seeking employment.

Solutions

Expert Solution

1. How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Ans is a) Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic.

2. A binding minimum wage will decrease the income of only those workers in jobs that would normally pay more than minimum wage

Ans is b) only those workers in jobs that would normally pay more than minimum wage

A binding minimum wage creates labor surplus, so now the firms will reduce the wages that would normally pay more than minimum wage.

Rahul Sunny answered 1 year ago

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