Suppose that policy makers, for any number of reasons, are worried about the pri
ID: 1135444 • Letter: S
Question
Suppose that policy makers, for any number of reasons, are worried about the price of beef becoming too high. The graph of the market for beef is shown.
What type of price control would policy makers use to keep the price of beef from getting too high?
a price floor
a price ceiling
a price war
a price wall
a price marker
Suppose that the government does implement the appropriate price control you selected previously. Which of these prices would be binding?
$7
$5
$6
10 9 8 Supply Price ($)6 5 4 3 2 Demand 0 1 23 4 5 6 78 9 10 Quantity (in thousands of kilograms)Explanation / Answer
Price ceiling. It places a maximum upper bound above which the price cannot rise. Hence government will impose a price rise to curb the rising market price.
Any price below the market price becomes binding. Hence a price of $5 is the price selected for price ceiling because it is lower than the market price of $6.
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