Question

28)Another name for a non-binding price floor set by a government in a market is a:

(a)Binding maximum price

(b)Binding price floor

(c)Non-binding maximum price

(24)Which of the following statements is true?

Non-binding price ceilings:

(a)Are also minimum prices under the law

(b)Are set by governments below equilibrium price to encourage production

(c)Are prices that facilitate market equilibrium in markets

(d)None of the above

(d)None of the above

(34)Which of the following statements is false?

If the interest rate in a market for agricultural loans is capped at 1.2 percent by law for small family owned farms, it can be concluded that:

(a)The interest cap is a binding price ceiling for agricultural loans

(b)The demand for these loans will exceed their supply in the market

(c)The market forces of supply and demand for these loans will clear the market

(d)All of the above

Answer 1

a) "C"

it is non binding maximum price. As the price floor sets the maximum price below which the goods cannot be sold.

b) "D"

Non binding price ceiling are those price ceiling or the minimum price set above the equilibrium price level. If it is as per law it is binding hence it will not be ineffective.

c) If this interest rate is below the market equilibrium (that information will be given in questions above ) then it will increase the demand for loans and decrease the supply, the loans demand will exceed the supply and create a shortage. the answer is "B".