#1
What is the effect of a price ceiling below the equilibrium price?
Shortage
ExplanationShortage occurs when the quantity demanded exceeds the quantity supplied.
#2
What is a consequence of a price floor set above the equilibrium price?
Surplus
ExplanationA surplus occurs when the quantity supplied exceeds the quantity demanded.
#3
What is the economic term for a situation where the quantity demanded exceeds the quantity supplied at the current price?
Shortage
ExplanationShortage occurs when demand surpasses available supply at the current price level.
#4
In a free market, what determines the equilibrium price and quantity?
Supply and demand
ExplanationEquilibrium price and quantity are determined by the intersection of supply and demand curves.
#5
What is the term for the price at which the quantity demanded equals the quantity supplied?
Market price
ExplanationMarket price is the equilibrium point where supply meets demand.
#6
What is the term for a market condition where the quantity demanded equals the quantity supplied?
Market equilibrium
ExplanationMarket equilibrium occurs when supply equals demand.
#7
What happens to consumer surplus when a price ceiling is imposed?
Decreases
ExplanationConsumer surplus decreases due to limited supply and higher demand.
#8
How does producer surplus change when a price floor is imposed?
Increases
ExplanationProducer surplus increases as the price floor ensures higher prices.
#9
What is the primary goal of implementing price controls?
To stabilize prices
ExplanationPrice controls aim to prevent extreme fluctuations in prices.
#10
How does a price ceiling affect the quantity supplied?
Decreases
ExplanationQuantity supplied decreases due to restricted pricing.
#11
What is the term used to describe a situation where the price ceiling is set above the equilibrium price?
Non-binding price ceiling
ExplanationWhen a price ceiling is set above equilibrium, it has no effect and is termed non-binding.
#12
What happens to consumer surplus when a price floor is implemented?
Decreases
ExplanationConsumer surplus decreases due to higher prices enforced by the floor.
#13
In the long run, what effect does a binding price floor have on the market?
Creates a surplus
ExplanationA binding price floor creates surplus, potentially leading to inefficiency.
#14
Which of the following is a potential consequence of price controls on quality?
Decreased quality
ExplanationPrice controls may lead to decreased quality as producers seek to cut costs.
#15
What is a likely effect of a binding price ceiling on the quality of goods or services?
Reduced quality
ExplanationWith limited profit potential, producers may cut costs, leading to reduced quality.