Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

5. Consumer and Producer Surplus; Price Ceilings and Floors

Price Ceilings, Price Floors, and Black Markets

Microeconomics

5. Consumer and Producer Surplus; Price Ceilings and Floors

Price Ceilings, Price Floors, and Black Markets

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Multiple Choice

Which of the following statements regarding the expected effects of a price control imposed on a competitive market is false?

A price floor above the competitive equilibrium price will result in a surplus.

A price ceiling above the competitive equilibrium price will result in a surplus.

A price ceiling below the competitive equilibrium price will result in a shortage.

A nonbinding price floor will result in a quantity exchanged that is equal to the equilibrium quantity

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Verified step by step guidance

Understand the concept of price controls: Price controls are government-imposed limits on the prices that can be charged for goods and services in a market. The two main types are price ceilings and price floors.

Define a price ceiling: A price ceiling is a maximum price set by the government, below which a good or service cannot be sold. It is typically set below the equilibrium price to be effective.

Define a price floor: A price floor is a minimum price set by the government, above which a good or service cannot be sold. It is typically set above the equilibrium price to be effective.

Analyze the effects of a price ceiling above the equilibrium price: If a price ceiling is set above the equilibrium price, it is nonbinding, meaning it does not affect the market because the market price is already below the ceiling. Therefore, it does not create a surplus or shortage.

Evaluate the given statements: The statement 'A price ceiling above the competitive equilibrium price will result in a surplus' is false because a nonbinding price ceiling does not affect the market equilibrium, and thus does not create a surplus.