Question

1.In the case of a binding price ceiling, which of the following is false?

Producers may be more inclined to discriminate when choosing whom to sell to

A black market for the good may develop

Sellers may give free gifts to consumers that purchase their good

The quality of the good may decrease

2.In the case of a binding price ceiling, it is true that

Supply will decrease

There is excess supply

None of these answers are true

3.Suppose a market is characterized by consumers waiting in long lines and persistent shortages of the good. This is most likely the result of which government action?

The setting of a price floor

The setting of a price ceiling

An increase in taxes on the good

A decrease in taxes on the good

Demand will increase

4.

In the case of a binding price floor, which of the following is true?

The equilibrium market price is higher than the price floor

The price floor will cause an increase in the quantity demanded

Consumers can easily find units to purchase

At the price floor there would be excess demand for the good

Please help.Thank you

Answer 1

1.In the case of a binding price ceiling, the false statement is,

Sellers may give free gifts to consumers that purchase their good.

Explanation:

In the case of price ceilling government sets the price below the equilibrium price level,for which the demand of the said good exceeds its supply. So due to excess demand producers may discriminate among the buyers by choosing whom to sell.There can be an existence of the black market where the prices of the goods will be hiked up.To provide the goods to the consumer the seller may decrease the quality of the product.