Question

In: Economics

A shortage results when a a. nonbinding price ceiling is removed from market. b. binding price...

A shortage results when a a. nonbinding price ceiling is removed from market. b. binding price ceiling is removed from a market. c. nonbining price celing is imposed on a market. d. binding price celing is imposed on a market.

Solutions

Expert Solution

Answer: Option D: Binding price ceiling is imposed on a market

Explanation: binding price ceiling refers to a situation where the government fixes the price below the equilibrium level of price. As a result the quantity demanded for the product at the binding ceiling price is more than the quantity supplied, which creates shortage for the product in the market. So option D is correct. Which is clearly evident from the below diagram, due to binding price ceiling the quantity demanded of the product in the market is OB and quantity supplied for the product is OA, so there a shortage to the extent of AB in the market.

Where a removal of non-binding price and binding price may results in setting the new price at equilibrium level, where the quantity demanded for a product equals with quantity supplied and creates no shortages for the product in a market. So option A and B cannot be correct.

Imposition of non binding price ceiling may results in fixing the price above equilibrium price. This never creates a shortage for the product in a market. Therefore option C cannot be correct.


Related Solutions

With a price ceiling, there is a transfer of surplus from producers to _________ and there may be a potential ______ market due to shortage in the market.
With a price ceiling, there is a transfer of surplus from producers to _________ and there may be a potential ______ market due to shortage in the market.Group of answer choices:Consumers: BlackGovernment: GrayGovernment: BlackConsumers: Gray
What is a price ceiling and when does it becomes binding and non binding? Also provide...
What is a price ceiling and when does it becomes binding and non binding? Also provide an example. What is a price floor and when does it becomes binding and non binding? Also provide an example.
Draw and explain a market with a binding price floor. Does this create a shortage or...
Draw and explain a market with a binding price floor. Does this create a shortage or a surplus in the market? Why? a. Draw and explain a market with a binding price ceiling. Does this create a shortage or a surplus in the market? Why? b. Draw and explain how a per unit tax on shoes impacts the market. Does the tax increase or decrease TS? Why? c. Suppose a $2 per unit tax is placed on packs of cigarettes....
What is a shortage? When does it occur? What is the result of a government imposed price floor (price ceiling)?
31. What is a shortage? When does it occur? 32. What is the result of a government imposed price floor (price ceiling)? 33. What role do prices play in allocating resources and goods?
1. Which of the following statements is false about a binding price ceiling? -A binding price...
1. Which of the following statements is false about a binding price ceiling? -A binding price ceiling will lower the price of a good -A binding price ceiling will always increase surplus for all consumers. -A binding price ceiling leads to a shortage of goods -A binding price ceiling can create deadweight loss 2. Which of the following is the explicit cost? -Interest foregone on the capital invested in business -Interest received on an investment -Interest paid on loan taken...
1. Graph the market for apartment units that has a binding price ceiling (rent control) and...
1. Graph the market for apartment units that has a binding price ceiling (rent control) and a consumer subsidy. 2. Graph the market for tobacco that has both a consumer tax, and a producer subsidy. For each, always indicate any surplus or shortage, and under- or over-allocation.
If the government removes a binding price floor from a market, then the price paid by...
If the government removes a binding price floor from a market, then the price paid by buyers will increase, and the quantity sold in the market will increase. increase, and the quantity sold in the market will decrease. decrease, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will decrease. Under rent control, bribery is a mechanism to bring the total price of an apartment (including the bribe) closer to the equilibrium...
When a shortage exists in the market, the price is below equilibrium. Consequently, buyers are willing...
When a shortage exists in the market, the price is below equilibrium. Consequently, buyers are willing to buy more than sellers are willing to sell at that price. If demand and supply curves do not move, more will be sold only if the price increases. Select one: True False Question text If Betty experiences a decrease in pay, we would expect Betty’s demand for inferior goods to increase. Select one: True False A decrease in supply causes price to rise,...
What would happen to the O2-binding curve of hemoglobin when BPG is removed from its environment?...
What would happen to the O2-binding curve of hemoglobin when BPG is removed from its environment? A. The shape of the binding curve will not be affected. B. The sigmoid nature of the curve would diminish. C. The sigmoid nature of the curve would become more accentuated. D. Hemoglobin will not bind O2 any more.
Assume in a simple economic example that a binding/effective price ceiling is implemented and in place,...
Assume in a simple economic example that a binding/effective price ceiling is implemented and in place, in a given market for some good, called “Good X”. Next, an economic change occurs in the market. The economic change that occurs is a decrease in the number of buyers in the market. Assume that this is a competitive market, what will happen to the market selling price and the market quantity that is bought and sold in the market for “Good X”?...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT