EC 110 MICROECONOMICS: SUPPLY, DEMAND, AND
GOVERNMENT POLICIES WITH EXPLAINED ANSWERS
100% CORRECT DOWNLOAD TO SCORE A
Supply, Demand, and Government Policies
1. The language of price controls
Suppose that, in a competitive market without government regulations, the equilibrium price of
hamburgers is $7 each.
Complete the following table by indicating whether each of the statements is an example of a
price ceiling or a price floor and whether it is binding or nonbinding.
Price Binding or
Statement
Not
Control
Price Binding
There are many teenagers who would like to work at fast-food
restaurants, but they are not hired due to minimum-wage
laws. floor
Price Non-
The government prohibits fast-food restaurants from
selling hamburgers for more than $8 each.
ceiling binding
Price
Binding
The government has instituted a legal minimum price of $8 each for
hamburgers.
floor
Points:
1/1
A price ceiling is a legal maximum on the price at which a good can be sold. Therefore,
, EC 110 MICROECONOMICS: SUPPLY, DEMAND, AND
GOVERNMENT POLICIES WITH EXPLAINED ANSWERS
100% CORRECT DOWNLOAD TO SCORE A
prohibiting fast-food restaurants from selling hamburgers for more than a particular price is an
example of a price ceiling. A binding price ceiling is a price ceiling that is set below the
equilibrium price. Because the equilibrium price is $7 each for hamburgers, a legal maximum
price of $8 is a non-binding price ceiling. A binding price ceiling will ultimately cause a
shortage, while a non-binding price ceiling has no effect on the equilibrium price and quantity.
A price floor is a legal minimum on the price at which a good can be sold. Therefore,
prohibiting fast-food restaurants from selling hamburgers for less than a particular price is an
example of a price floor. A binding price floor is a price floor that is set above the equilibrium
price. Because the equilibrium price is $7 each, a legal minimum price of $8 each is a binding
price floor. A binding price floor will ultimately cause a surplus, while a non-binding price floor
has no effect on the equilibrium price and quantity.
In the labor market, minimum wage laws are an example of a price floor while a cap on wages is
an example of a price ceiling. Moreover, the impact of the minimum wage laws depends on the
skill and experience of the worker. In this case, teenagers fall in the low-skill category of
workers, and, thus, the free market equilibrium wage of teenagers is typically much lower than
the minimum wage mandated by the government. Therefore, minimum-wage laws prevent some
teenagers from working because the binding price floor causes a surplus of workers in this labor
market
2. Price controls in the Florida orange market
GOVERNMENT POLICIES WITH EXPLAINED ANSWERS
100% CORRECT DOWNLOAD TO SCORE A
Supply, Demand, and Government Policies
1. The language of price controls
Suppose that, in a competitive market without government regulations, the equilibrium price of
hamburgers is $7 each.
Complete the following table by indicating whether each of the statements is an example of a
price ceiling or a price floor and whether it is binding or nonbinding.
Price Binding or
Statement
Not
Control
Price Binding
There are many teenagers who would like to work at fast-food
restaurants, but they are not hired due to minimum-wage
laws. floor
Price Non-
The government prohibits fast-food restaurants from
selling hamburgers for more than $8 each.
ceiling binding
Price
Binding
The government has instituted a legal minimum price of $8 each for
hamburgers.
floor
Points:
1/1
A price ceiling is a legal maximum on the price at which a good can be sold. Therefore,
, EC 110 MICROECONOMICS: SUPPLY, DEMAND, AND
GOVERNMENT POLICIES WITH EXPLAINED ANSWERS
100% CORRECT DOWNLOAD TO SCORE A
prohibiting fast-food restaurants from selling hamburgers for more than a particular price is an
example of a price ceiling. A binding price ceiling is a price ceiling that is set below the
equilibrium price. Because the equilibrium price is $7 each for hamburgers, a legal maximum
price of $8 is a non-binding price ceiling. A binding price ceiling will ultimately cause a
shortage, while a non-binding price ceiling has no effect on the equilibrium price and quantity.
A price floor is a legal minimum on the price at which a good can be sold. Therefore,
prohibiting fast-food restaurants from selling hamburgers for less than a particular price is an
example of a price floor. A binding price floor is a price floor that is set above the equilibrium
price. Because the equilibrium price is $7 each, a legal minimum price of $8 each is a binding
price floor. A binding price floor will ultimately cause a surplus, while a non-binding price floor
has no effect on the equilibrium price and quantity.
In the labor market, minimum wage laws are an example of a price floor while a cap on wages is
an example of a price ceiling. Moreover, the impact of the minimum wage laws depends on the
skill and experience of the worker. In this case, teenagers fall in the low-skill category of
workers, and, thus, the free market equilibrium wage of teenagers is typically much lower than
the minimum wage mandated by the government. Therefore, minimum-wage laws prevent some
teenagers from working because the binding price floor causes a surplus of workers in this labor
market
2. Price controls in the Florida orange market
