Deck 5: Price Controls and Market Efficiency

Question 1

Consider a competitive labour market.The likely consequence of a binding minimum wage in this labour market is

A)a labour shortage.
B)a lower wage for all individuals.
C)a higher wage for all individuals.
D)excess demand for workers.
E)unemployment.

Answer 1

unemployment.

Question 2

Which of the following statements about government price controls is most accurate.They

A)act as a guideline to producers as to what is a fair price.
B)inform consumers what is the maximum price they should pay.
C)usually set upper or lower limits on prices.
D)ensure that the actual price is at its free-market equilibrium.
E)ensure that transactions take place at a fair price.

Answer 2

usually set upper or lower limits on prices.

Question 3

Consider the market for pulp and paper.Suppose,in an attempt to help this industry,the government sets a price floor above the free-market equilibrium price.The result will be

A)a continuation of the market-determined equilibrium price and quantity.
B)the quantity demanded will exceed quantity supplied and there will be a shortage in the market.
C)the quantity supplied will exceed quantity demanded and there will be a surplus in the market.
D)a new free-market equilibrium at a higher price and lower output level.
E)increased government revenue.

Answer 3

the quantity supplied will exceed quantity demanded and there will be a surplus in the market.

Question 4

A minimum permissible price established by the government is called

A)the equilibrium price.
B)the margin price.
C)a price ceiling.
D)a price floor.
E)the fair price.

Question 5

In a market where we observe a disequilibrium,quantity exchanged is determined

A)by the quantity demanded.
B)by the greater of quantity demanded and quantity supplied.
C)by neither quantity demanded nor quantity supplied.
D)by the lesser of quantity demanded and quantity supplied.
E)by the quantity supplied.

Question 6

In which type of market would a government be most likely to establish a "legal" price floor?

A)housing market
B)labour market
C)diamond market
D)electricity market
E)natural gas market

Question 7

A binding price floor is a

A)minimum price,below equilibrium,below which price is not allowed to fall.
B)maximum price,above equilibrium,which price is not allowed to exceed.
C)minimum price,above equilibrium,below which price is not allowed to fall.
D)maximum price,below equilibrium,which price is not allowed to exceed.
E)any minimum price below which price is not allowed to fall.

Question 8

In free and competitive markets,surpluses are eliminated by

A)government price controls.
B)government purchases.
C)black markets.
D)price increases.
E)price decreases.

Question 9

Suppose the government sets a particular price in the market for gold,which results in an excess supply.In this situation,

A)the market is in equilibrium.
B)the market is in disequilibrium.
C)there are unsuccessful buyers.
D)the gold market has not reached the point of saturation.
E)no gold will be exchanged.

Question 10

In competitive markets,price floors and price ceilings usually lead to

A)shortages.
B)a reduction in quantities exchanged.
C)surpluses.
D)production control by the government.
E)more equitable distributions of commodities.

Question 11

For a price floor to be binding,it must be set

A)very low.
B)at the free-market equilibrium price.
C)below the free-market equilibrium price.
D)at a level such that there exists some unsatisfied demand.
E)above the free-market equilibrium price.

Question 12

A legal price floor is a

A)price set by the government at which all goods or services must be legally sold.
B)maximum price above which sales cannot legally be made.
C)minimum price below which sales cannot legally be made.
D)price above which there would be no demand.
E)price below which there would be no supply.

Question 13

Consider the market for iron ore,an important industrial input.Suppose the government sets a price floor below the free-market equilibrium price.The result will be

A)a continuation of the free-market equilibrium price and quantity.
B)the quantity demanded will exceed quantity supplied and there will be a shortage in the market.
C)the quantity supplied will exceed quantity demanded and there will be a surplus in the market.
D)a new free-market equilibrium at a lower price and higher output level.
E)increased government revenue.

Question 14

A legally imposed upper limit on a price is called

A)a price floor.
B)a price support.
C)an excise price.
D)a price ceiling.
E)a government price.

Question 15

In free and competitive markets,shortages are eliminated by

A)government price controls.
B)rationing.
C)black markets.
D)price increases.
E)price decreases.

Question 16

The price of a good or a service can be determined by free interaction of demand and supply or by a government price regulation.One important difference between these two price-determining methods is

A)there are no shortages or surpluses at the free-market equilibrium price.
B)regulated prices are fairer since more people can then afford the goods or services.
C)that a regulated price above the equilibrium price will always result in shortages.
D)the government is in the best position to know the needs of the people.
E)one is capitalist and the other is communist.

Question 17

At any disequilibrium price,whether government controlled or not,the quantity actually exchanged is determined by

A)the elasticity of supply.
B)the elasticity of demand.
C)government decree.
D)the lesser of quantity demanded and quantity supplied.
E)the greater of quantity demanded and quantity supplied.

Question 18

Government price controls are policies that attempt to maintain the

A)quantity bought at less than the quantity sold.
B)quantity sold at less than the quantity bought.
C)the price at some disequilibrium value.
D)market price at equilibrium.
E)price requested by the seller.

Question 19

Consider a market in which there is a government-set price.If there is excess demand at this price,

A)the market is in its free-market equilibrium.
B)the market is in disequilibrium.
C)there are unsuccessful sellers.
D)the product has not reached the point of saturation.
E)none of the product will be exchanged.

Question 20

If the government fixes the price of good X above its free-market equilibrium level,we should expect

A)a surplus of good X to occur.
B)a shortage of good X to occur.
C)an excess demand for good X.
D)a black market to arise for good X.
E)a new free-market equilibrium price to be established.

Question 21

In a competitive market,a legal price ceiling set above the free-market equilibrium price will result in

A)a continuation of the free-market equilibrium price and quantity.
B)the quantity demanded exceeding quantity supplied and thus a shortage in the market.
C)the quantity supplied exceeding quantity demanded and thus a surplus in the market.
D)a new free-market equilibrium at a higher price and lower output level.
E)increased profits to the firms in the industry.

Question 22

A price ceiling set below the free-market equilibrium price will result in

A)a clearing of the market.
B)greater quantity exchanged.
C)surpluses.
D)excess demand.
E)excess supply.

Question 23

A legal price ceiling,if it is binding,is a

A)minimum price,below equilibrium,which price is not allowed to fall below.
B)maximum price,above equilibrium,which price is not allowed to exceed.
C)minimum price,above equilibrium,which price is not allowed to fall below.
D)maximum price,below equilibrium,which a price is not allowed to exceed.
E)any maximum price which price is not allowed to exceed.

Question 24

A binding minimum wage established by the government

A)is essentially a price ceiling that creates a shortage of workers.
B)will be effective only if the minimum wage is set below the free-market equilibrium wage.
C)will have no effect on the quantity of labour employed.
D)will affect adversely only those workers whose value of productivity is greater than this minimum wage.
E)is a price floor that will create a surplus of workers if the labour market is competitive.

Question 25

If the equilibrium wage in a competitive labour market is $9 per hour,and the government raises the minimum wage from $7 to $8 per hour,what will be the effect in this market?

A)the level of employment will decrease
B)unemployment will increase
C)unemployment will decrease
D)there will be no effect on employment
E)the average wage paid to workers will increase

Question 26

Which of the following is an example of a black-market transaction?

A)A person buys a hotdog on a street corner.
B)A person buys a product at a price greater than the government-imposed ceiling price.
C)A person buys a product at a price below the government-imposed ceiling price.
D)A person places a bet at a racetrack.
E)A person buys a product at a price greater than the government-imposed price floor.

Question 27

Suppose the free-market equilibrium price for ice time at privately operated hockey arenas is $250 per hour.If the municipal government imposes a price ceiling of $130 per hour,we can expect to see

A)an adjustment of the free-market equilibrium price to $100.
B)an excess supply of ice time.
C)a black market price below the free-market equilibrium price.
D)that neither excess supply nor excess demand is created.
E)an excess demand for ice time.

Question 28

If the free-market equilibrium price for some product is $25,then a legal price ceiling set at $15 will bring about

A)the same general effects as a price ceiling of $25.
B)the same general effects as an equilibrium price of $15.
C)no change in the market outcomes.
D)a surplus of the good.
E)a shortage of the good.

Question 29

Suppose the government establishes a binding price floor for some product.At the price floor,

A)although sellers are selling all of the product that they desire,consumers are not able to buy all that they desire.
B)a new free-market equilibrium price and quantity will be established.
C)both sellers and buyers are satisfied with the quantity that is being exchanged.
D)both sellers and buyers are exchanging the free-market equilibrium quantity.
E)although consumers are purchasing all of the product they desire at this price,the sellers are not selling all they desire.

Question 30

Suppose the government decides to eliminate a binding price floor that it had previously imposed on a particular good.It can be expected that

A)the price would increase,the quantity demanded would decrease and the quantity supplied would increase.
B)the price would increase,the quantity demanded would increase and the quantity supplied would decrease.
C)the price would decrease,the quantity demanded would decrease and the quantity supplied would increase.
D)the price would decrease,the quantity demanded would increase and the quantity supplied would decrease.
E)no changes would take place.

Question 31

For a legislated minimum wage to be binding in a competitive labour market,it must be set

A)below the free-market wage.
B)equal to the free-market wage.
C)above the free-market wage.
D)at or below the free-market wage.
E)such that no worker can earn more than the established minimum wage.

Question 32

Suppose that the free-market equilibrium price of downtown-to-airport taxi service would be $45 per trip,but in an effort to protect taxi owners the government has fixed the price at $60 per trip.At this legislated price the quantity ________ will be greater than the quantity ________,resulting in a ________ of downtown-to-airport taxi services.

A)demanded; supplied; surplus
B)supplied; demanded; surplus
C)demanded; supplied; shortage
D)supplied; demanded; shortage
E)demanded; supplied; reduction in equilibrium price

Question 33

An excess supply of some product is the same thing as

A)a surplus.
B)an excess demand.
C)a shortage.
D)scarcity.
E)price floor.

Question 34

With respect to some commodity,X,if government objectives are to (1)restrict production and (2)keep prices down to protect consumers,then legislated price ceilings will

A)be a dismal failure as neither goal can ever be achieved with price ceilings.
B)satisfy both goals but only if a black market develops.
C)satisfy only the second goal if a black market develops.
D)only have an effect on commodities at the international level.
E)satisfy both goals as long as a black market does not develop.

Question 35

In a competitive market,a price ceiling set below the free-market equilibrium price will result in

A)a continuation of the free-market equilibrium price and quantity.
B)the quantity demanded exceeding quantity supplied and thus a shortage in the market.
C)the quantity supplied exceeding quantity demanded and thus a surplus in the market.
D)a new free-market equilibrium at a lower price and higher output level.
E)excess supply.

Question 36

Which of the following statements best differentiates price ceilings and price floors?

A)Price ceilings represent minimum prices,while price floors represent maximum prices.
B)Binding price ceilings are always set below the equilibrium price,whereas binding price floors are always set above the equilibrium price.
C)Price ceilings are always effective,whereas price floors are rarely effective.
D)Price floors cause shortages to appear,whereas price ceilings have the opposite effect.
E)Price ceilings and price floors have the same effects.

Question 37

Suppose that the free-market equilibrium price of natural gas would be $2.00 per unit,but in an effort to protect consumers the government has fixed the price at $1.50.At this ceiling price the quantity ________ will be greater than the quantity ________,resulting in a ________ of natural gas.

A)demanded; supplied; surplus
B)supplied; demanded; surplus
C)demanded; supplied; shortage
D)supplied; demanded; shortage
E)demanded; supplied; reduction in equilibrium price

Question 38

An excess demand for some product is the same thing as

A)a surplus.
B)an excess supply.
C)a shortage.
D)black market.
E)price ceiling.

Question 39

Which of the following is true of price ceilings?

A)Firms must charge the price established as a price ceiling.
B)If the ceiling price is set above the free-market equilibrium price it will have no effect on the market.
C)A ceiling price below the free-market equilibrium price is not binding.
D)With a non-binding ceiling price an excess demand for the product will develop.
E)With a binding ceiling price a surplus of the commodity will develop.

Question 40

Suppose the government decides to eliminate a binding price ceiling that it had previously imposed on a particular good.It can be expected that

A)the price would increase,quantity demanded would decrease,and quantity supplied would decrease.
B)the price would increase,quantity demanded would decrease,and quantity supplied would increase.
C)the price would decrease,quantity demanded would decrease,and quantity supplied would increase.
D)the price would decrease,quantity demanded would increase,and quantity supplied would decrease.
E)no change would take place

Question 41

FIGURE 5-2
Refer to Figure 5-2.A price floor set at $2.50 will result in

A)a shortage of 5 units.
B)a shortage of 10 units.
C)a surplus of 10 units.
D)a surplus of 5 units.
E)no change to the market outcomes.

Question 42

FIGURE 5-1
Refer to Figure 5-1.If the diagram applies to the labour market,and P₃ represents a legislated minimum wage,

A)there will be excess demand of AC in the labour market.
B)there will be unemployment of AC in the labour market.
C)the free-market equilibrium wage is P₀ and the labour market is unaffected by the minimum wage.
D)the labour market is in disequilibrium.
E)the amount of labour employed will rise from quantity F to quantity C.

Question 43

FIGURE 5-1
Refer to Figure 5-1.With a price ceiling of P₃,how large will the resulting shortage be?

A)FD
B)AF
C)AC
D)BC
E)FC

Question 44

The shortages associated with a binding price ceiling will be the smallest when

A)both supply and demand are highly elastic.
B)both supply and demand are highly inelastic.
C)supply is highly elastic and demand is highly inelastic.
D)supply is highly inelastic and demand is highly elastic.
E)none of the above-the size of the shortage has nothing to do with demand and supply elasticities.

Question 45

The surpluses associated with a binding price floor will be the smallest when

A)both supply and demand are highly elastic.
B)both supply and demand are highly inelastic.
C)supply is highly elastic and demand is highly inelastic.
D)supply is highly inelastic and demand is highly elastic.
E)both supply and demand are unit elastic.

Question 46

If the equilibrium price for some product is $1000,a price ceiling of $1200 will result in

A)the same general effects as a price floor of $1200.
B)the same general effects as an administered price of $1200.
C)the same general effects as a price ceiling of $600.
D)massive surpluses of the good.
E)no effects because the price ceiling is not binding at that price.

Question 47

FIGURE 5-1
Refer to Figure 5-1.If the government imposes an administered price at P₂,the result will be a

A)surplus of BD.
B)shortage of AC.
C)shortage of FD.
D)surplus of AF.
E)surplus of 0D.

Question 48

FIGURE 5-1
Refer to Figure 5-1.In this market,suppose the government announces that the price must be P₃ or lower.This price (P₃)is referred to as

A)a non-binding price ceiling.
B)a binding price floor.
C)an equilibrium price.
D)a price ceiling.
E)a price floor.

Question 49

FIGURE 5-2
Refer to Figure 5-2.A price floor set at a price of $1.00 will result in

A)a shortage of 10 units.
B)a shortage of 20 units.
C)a surplus of 10 units.
D)a surplus of 20 units.
E)no change in the market outcomes.

Question 50

If a binding price ceiling is in effect and if the demand for the product increases,one consequence would be

A)a decrease in the amount of excess supply.
B)a decrease in the amount of excess demand.
C)an increase in the amount of excess supply.
D)an increase in the amount of excess demand.
E)no change in the excess supply or demand for the product.

Question 51

FIGURE 5-1
Refer to Figure 5-1.To be binding,a legal price ceiling must lie

A)above P₀ but below P₂.
B)anywhere above P₀.
C)below P₀ but above P₃.
D)anywhere below P₀.
E)anywhere above 0.

Question 52

If a binding price floor is in place and if the demand curve for the product shifts rightward,one consequence would be

A)an increase in the amount of excess demand.
B)a decrease in the amount of excess demand.
C)an increase in the amount of excess supply.
D)a decrease in the amount of excess supply.
E)a decrease in the quantity exchanged.

Question 53

FIGURE 5-2
Refer to Figure 5-2.A price ceiling set at a price of $1.00 per unit will result in

A)a shortage of 10 units.
B)a shortage of 20 units.
C)a surplus of 10 units.
D)a surplus of 20 units.
E)no change to the market outcomes.

Question 54

If a binding price ceiling is in place and if the demand curve for the product shifts rightward,one consequence would be

A)the quantity exchanged would increase.
B)the quantity exchanged would remain constant.
C)the quantity exchanged would decrease.
D)an increase in the amount of excess supply.
E)a decrease in the amount of excess demand.

Question 55

FIGURE 5-2
Refer to Figure 5-2.A price ceiling set at a price of $2.50 per unit will result in

A)a shortage of 5 units.
B)a shortage of 10 units.
C)a surplus of 5 units.
D)a surplus of 10 units.
E)no change in the market outcomes.

Question 56

FIGURE 5-1
Refer to Figure 5-1.In this market,suppose the government announces that the price must be P₂ or higher.This price (P₂)is referred to as

A)a price ceiling.
B)a price floor.
C)a non-binding price floor.
D)a binding price ceiling.
E)an equilibrium price.

Question 57

If the government imposes a price ceiling for some product,and a black market subsequently develops that gains control of all of the reduced output of the product,then

A)the black market price will be lower than the ceiling price.
B)excess profits will flow back to consumers.
C)the quantity demanded will exceed quantity supplied at the black market price.
D)the black market price will be higher than the free-market equilibrium price.
E)consumers will be better off than they would be in the absence of the black market.

Question 58

FIGURE 5-3
Refer to Figure 5-3.P₂ represents a price imposed by the government.What is the quantity of this good that would be exchanged in the market?

A)Q₀
B)Q₁
C)Q₂
D)Q₃
E)Q₄

Question 59

If the equilibrium price for some product is $1000,a price ceiling of $800 will result in

A)the same general effects as a price ceiling of $1200.
B)the same general effects as a price floor of $1200.
C)the same general effects as a price ceiling of $600.
D)massive surpluses of the good.
E)no effects because the price ceiling is not binding at that price.

Question 60

A predictable result of the imposition of binding price floors or price ceilings is

A)shortages.
B)a reduction in quantities exchanged.
C)surpluses.
D)production control by the government.
E)a more equitable distribution of commodities.

Question 61

Demand and Supply Schedules for Chocolate Bars
TABLE 5-1
Refer to Table 5-1.Suppose that as a public health measure the government wants to reduce the number of chocolate bars consumed by children.If the government imposes a price of $1.60 per chocolate bar,how many fewer chocolate bars will be consumed each week,relative to the competitive equilibrium?

A)200
B)300
C)1700
D)2000
E)1800

Question 62

Assuming that the long-run supply of housing is more ________ than the short-run supply,the imposition of binding rent controls will generally ________.

A)inelastic; lead to a reduction in the housing shortage over time
B)elastic; lead to a worsening of the housing shortage over time
C)inelastic; lead to no significant change in the housing shortage
D)elastic; lead to only a temporary housing shortage
E)elastic; lead the price of rental housing to revert back to its equilibrium level

Question 63

The use of legislated rent controls typically

A)has no effect on the distribution of income between tenants and landlords or on the availability of rental accommodations.
B)affects the distribution of income between tenants and landlords but does not affect the supply of rental accommodations.
C)has no effect on the distribution of income between tenants and landlords but does affect the supply of rental accommodations.
D)affects the distribution of income between tenants and landlords and also affects the availability of rental accommodations.
E)has much worse effects in the short run than in the long run.

Question 64

Demand and Supply Schedules for Chocolate Bars
TABLE 5-1
Refer to Table 5-1.Suppose the government imposed a price of $0.60 per chocolate bar.The result would be

A)excess demand of 450 chocolate bars per week.
B)excess supply of 450 chocolate bars per week.
C)excess supply of 1750 chocolate bars per week.
D)excess demand of 2200 chocolate bars per week.
E)stockpiling of unsold chocolate bars.

Question 65

Suppose the government imposes a price ceiling on rental housing that is below the market-clearing price.The resulting shortage will be

A)greater the more recently the controlled price went into effect.
B)smaller the longer the controlled price has been in effect.
C)greater the more elastic the demand for rental housing.
D)smaller the more elastic the demand for rental housing.
E)diminished over time.

Question 66

FIGURE 5-3
Refer to Figure 5-3.To be effective,a price floor must lie

A)above P₁ but below P₂.
B)anywhere above P₁.
C)below P₁ but above P₃.
D)anywhere below P₁.
E)within the boundaries of P₂ and P₃.

Question 67

Demand and Supply Schedules for Chocolate Bars
TABLE 5-1
Refer to Table 5-1.Suppose the government imposed a price of $1.80 per chocolate bar.A likely result from this policy is

A)the development of a black market in chocolate bars.
B)the allocation of chocolate bars by sellers preference.
C)the allocation of chocolate bars on a first-come,first-serve basis.
D)the stockpiling of unsold inventories of chocolate bars.
E)the rationing of chocolate bars.

Question 68

FIGURE 5-3
Refer to Figure 5-3.If the government imposes a price floor at P₃,the result would be a price and quantity combination of

A)P₃ and Q₃.
B)P₃ and Q₄.
C)P₂ and Q₁.
D)P₁ and Q₀.
E)P₃ and Q₀.

Question 69

Demand and Supply Schedules for Chocolate Bars
TABLE 5-1
Refer to Table 5-1.Suppose that as a public-health measure the government wants to reduce the number of chocolate bars that children consume.To achieve this outcome the government could implement which of the following policies?

A)Impose an equilibrium price of $1.80.
B)Impose a price floor of $1.80.
C)Impose a price ceiling of $1.80.
D)Impose an equilibrium price of $1.20.
E)Impose a price ceiling of $2.00.

Question 70

5.2 Rent Controls: A Case Study of Price Ceilings FIGURE 5-1
Refer to Figure 5-1.If the diagram applies to the market for rental housing and P₃ represents the maximum rent that can be charged,then

A)there will be an excess supply of rental units equal to BD.
B)units supplied will be reduced relative to the competitive equilibrium by AF rental units.
C)windfall profits will be earned by landlords.
D)there will be excess demand for rental units equal to FC.
E)there will be excess demand for rental units equal to AF.

Question 71

In the presence of binding rent controls,the shortage of housing is smaller

A)the higher is the elasticity of demand for housing.
B)the lower is the elasticity of supply of housing.
C)the longer is the length of time the rent controls are in place.
D)the greater is the difference between the equilibrium price and the rent-controlled price.
E)the more elastic is the long-run supply of housing.

Question 72

Concert promoters often set ticket prices below what they expect the market-clearing price to be.They are effectively imposing a ________ and the result is often ________ at a considerably higher price.

A)price ceiling; ticket scalping
B)price floor; ticket scalping
C)price ceiling; a surplus
D)price floor; a shortage
E)fair price; excess tickets

Question 73

Which of the explanations below best describes why a government might choose to impose binding rent controls?

A)To prevent landlords from making excess profits and to protect low-income tenants from increases in the cost of housing.
B)To prevent landlords from making excess profits and to reduce the long-term quantity of rental housing.
C)To increase the demand for rental housing and to discourage private ownership of low-cost rental housing developments.
D)To stabilize volatile rents,and thus to make the investment climate less uncertain for prospective investors in this sector.
E)To stimulate employment in the construction industry through the increased demand for new houses.

Question 74

FIGURE 5-3
Refer to Figure 5-3.Suppose P₃ represents a price imposed by the government.The result would be

A)excess supply of Q₃Q₄.
B)excess supply of Q₃Q₀.
C)excess demand of Q₀Q₂.
D)excess demand of Q₁Q₂.
E)excess demand of Q₃Q₄.

Question 75

Suppose the government establishes a ceiling on the price of rental accommodation that is lower than the free-market equilibrium price.In this case,

A)construction of new rental units will be encouraged.
B)the rental housing market will be unaffected.
C)those people who obtain rental units at the ceiling price will benefit.
D)a surplus of current rental units will develop.
E)the current stock of rental housing will be better maintained as there is a shortage of housing.

Question 76

Demand and Supply Schedules for Chocolate Bars
TABLE 5-1
Refer to Table 5-1.Suppose the government established a price floor of $1.00 per chocolate bar.How many thousands of chocolate bars would be exchanged per week?

A)2000
B)1850
C)1900
D)1800
E)2100

Question 77

Assume that the long-run supply of housing is highly elastic.The imposition of binding rent controls will lead to

A)a reduction in the housing shortage over time.
B)a worsening of the housing shortage over time.
C)no significant change in the housing shortage over time.
D)only a temporary housing shortage.
E)the price of rental housing to revert back to its free-market equilibrium level.

Question 78

Demand and Supply Schedules for Chocolate Bars
TABLE 5-1
Refer to Table 5-1.Suppose the government established a price ceiling of $1.00 per chocolate bar.How many thousands of chocolate bars would be exchanged per week?

A)1800
B)1850
C)1900
D)2000
E)2100

Question 79

Consider the market for rental accommodation.In the short run,the supply of this product tends to be

A)infinitely price elastic.
B)very price elastic.
C)unit price elastic.
D)very or completely price inelastic.
E)irrelevant to the housing market price.

Question 80

Suppose the demand for eggs is inelastic and that the market-clearing price is $1.50 per dozen.Now suppose the government imposes a minimum price of $2.00 per dozen.Why might the government implement such a policy?

A)to make consumers better off
B)to increase the incomes of egg farmers
C)to increase excess demand in the egg market
D)to reduce excess supply in the egg market
E)to decrease tax revenues from egg farmers