Explain what will happen when the government imposes a maximum price that is above the market equilibrium price. Why is this true?
What will be an ideal response?
The maximum price will have no impact on the market. This is true because the price ceiling will only have an impact when the market equilibrium price is above it. Firms and consumers will otherwise not change their behavior.
You might also like to view...
International dependence theories distinguish between two groups of countries known as
a. rich-poor. b. developed-developing. c. center-periphery. d. independent-dependent.
Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the short run would be:
A. P1 and Y2. B. P3 and Y1. C. P2 and Y2. D. P2 and Y3.
Suppose a binding price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?
A) Quantity demanded will decrease, quantity supplied will increase, and a surplus will result. B) Quantity demanded will increase, quantity supplied will decrease, and a surplus will result. C) Quantity demanded will decrease, quantity supplied will increase, and a shortage will result. D) Quantity demanded will increase, quantity supplied will decrease, and a shortage will result.
Refer to the information provided in Figure 16.4 below to answer the question(s) that follow.Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel.
Figure 16.4Refer to Figure 16.4. Suppose the government assigns property rights to the residents of Playa Del
Rey, then the airlines and the residents engage in negotiations. The ________ of air travel is 100 units. A. resulting efficient level B. government-regulated level C. maximum allowable level D. minimum allowable level