What is the difference between a rent ceiling set below the equilibrium rent and a rent ceiling set above the equilibrium rent?
What will be an ideal response?
Suppose the equilibrium rent without any rent ceiling is $1,000 per month. If the rent ceiling is set below $1,000, say at $800 per month, the ceiling then makes it unlawful to rent for more than $800. An apartment shortage results because the quantity demanded exceeds the quantity supplied at $800. A rent ceiling above the equilibrium rent $1,000, say $1,200 per month, has no effect. Why? Because no apartments would be rented at this price, with or without a law, so the ceiling has no effect.
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Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. If 4,000 pounds of pecans are sold
A) marginal benefit is equal to marginal cost. B) consumer surplus equals zero. C) the deadweight loss is equal to $12,000. D) the marginal benefit of each of the 4,000 pounds of pecans equals $3.
Market failure occurs when: a. the stock markets tumble due to heavy selling
b. the market economy fails to allocate resources efficiently. c. demand shows signs of slowing down. d. a country cannot produce a particular good or service at a lower opportunity cost than other countries.
Market failure can be caused by
a. too much competition. b. externalities. c. low consumer demand. d. scarcity.
Our trade balance in merchandise is ________ and our trade balance in services is __________.
A. positive; positive B. negative; negative C. negative; positive D. positive; negative