Back to Assignment Attempts: 0.7 1. The language of price controls Suppose that,
ID: 1140722 • Letter: B
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Back to Assignment Attempts: 0.7 1. The language of price controls Suppose that, in a competive market without government regulations, the equilibrium price of donuts is $1.00 each. Average: 0.7/1 Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price fioor and whether it nonbinding Statement The government prohibits donut shops from selling donuts for more than $1.20 each. There are many teenagers who would like to work at donut shops, but they are not hired due to minimum-wage laws. The government has instituted a legal minimum price $1.20 each for donuts. Price Control Binding or Not Grade It Now Save & Continue Continue without savingExplanation / Answer
Statement.1. Price ceiling, it is the maximum price that can be charged. Not binding as the equilibrium price is less than maximum price.
Statement.2. Price floor, it is the minimum wages that needs to be paid. Binding as the shop cannot hire more students otherwise which would increase the cost for the donut shop
Statement.3. Price floor, it is the minimum price that can be charged. Binding as it is greater than equilibrium price. With the higher price supply would be more whereas the demand would be less
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