Question

1. When will a minimum wage be an effective price control? When it is a...
A. Maximum "price" that is above the equilibrium price
B. Maximum "price" that is below the equilibrium price
C. Minimum "price that is above equilibrium price

2. Many major U.S. cities have adopted rent controls for some housing. An effective rent control is what kind of price control?
A. A price ceiling with a maximum price above equilibrium price.
B. A price floor with a minimum price above equilibrium price
C. A price ceiling with a maximum price below equilibrium price
D. A price floor with a minimum price below equilibrium price

An increase in an effective maximum legal price will do what to prices and quantities actually sold in a market? Prices will ________ and the quantities actually sold will _________.
A. Increase; decrease
B. Increase; increase
C. Decrease; decrease
D. Decrease; increase

Who is likely to be in favor of a price ceiling on a good?
A. The consumers of the good who can still purchase it after the ceiling is imposed
B. All producers of the good
C. The producers of the good who can still sell it after the ceiling is imposed.

Answer 1

1. C. Minimum "price that is above equilibrium price

2. C. A price ceiling with a maximum price below equilibrium price

Rent control is done by setting rent below the equilibrium price of housing.

3. B. Increase; increase

Increase in maximum legal price increases price of good and decreases demand of good while increases supply of good.

4. A. The consumers of the good who can still purchase it after the ceiling is imposed

Price Ceiling: When government fixed price of a product at a level lower than the equilibrium price, the price is called control price or price control by the government.

Consumers are in favor of price ceiling because they get good at lower price.