Question 12 Not yet answered Paints out of P Flag question Figure: Price Celling

Question

Question 12 Not yet answered Paints out of P Flag question Figure: Price Celling of Ps Marker Equilitrium ernoRe (Figure: Price Ceilig of P) Refer to the figure. Suppose a price celing of Ps s imposed. The shaded area may likely represent all of thefollowing EXCEPT: Select one oa the amount that buyers bribe sellers b. value of wasted time. c. the amount of corruption. d. consumer surplus. Question 13 Not yet answered Points out of 1 P Flag question what would be the tLEAST Ikely result of a prikce floor in the market for airline traven? Select one: o a. rapid replacement of old airliners with new aircraft O b. excellent engine maintenance o c. special incentives like airline mileage clubs to attract customers O d. narrow seats and basic meals like peanuts or chips with a coffee or soda

Explanation / Answer

Answer:

12. Option (c) would be correct.

option (a) is incorrect since it represents bribe which says highest price consumer is willing to pay minus the ceiling price. The shaded area also represents total amount of wasted time. Since prices are not allowed to rise, there are other ways in which buyer pays the seller. The above one represents those ways. The shaded area represents some part of consumer surplus due to the reduction in price.

13. Option (d) seems correct. Clearly, other options are quite implications of the price ceiling. Airlines would compete on the basis of quality rather than price. This leads to excessive increase in quality.

14. Option (b). shortage of 40 units. Clearly by looking at the diagram one can infer that.

16. Option(c) increases. More elastic, lesser tax burden and more deadweight loss.

17. Option (c) Buyers. Clearly since their demand is relatively inelastic. More inelastic demand, more the burden.

18. FALSE. Rather it depends on relative elasticities of demand and supply. More the elasticity, the lesser the tax burden on it.

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