Chapter 6
Supply, Demand, and Government Policies
MULTIPLE CHOICE
[i]. A price floor
a. is a legal minimum on the price at which a good can be sold.
b. is a legal maximum on the price at which a good can be sold.
c. will generally result in a market shortage.
d. will benefit the consumer, but hurt the supplier.
(ANSWER: A)
[ii]. If a price ceiling is not binding,
a. the equilibrium price is above the ceiling.
b. the equilibrium price is below the ceiling.
c. it has no legal enforcement mechanism.
d. people must voluntarily agree to abide by it.
(ANSWER: B)
[iii]. If a binding price ceiling is imposed in a market
a. there will be a surplus in the market.
b. the price will be legally forced toward equilibrium price.
c. there will be a shortage in the market.
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