1. 2. 1. The language of price controls Suppose that, in a competitive market wi

Question

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1. The language of price controls Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $7 each. 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 is binding or nonbinding Statement The government has instituted a legal mnimum price of $8 each for hamburgers. The government prohibits fast-food restaurants from selling hamburgers for more than $8 each There are many teenagers who would like to work at fast-food restaurants, but they are not hired due to minimum-wage laws. Price Control Binding or Not

Explanation / Answer

Answering only the first one as these are separate independent questions.

1) When the legal minimum has been set => it is a price floor. Since it is legal => it is binding

2) Since a maximum has been set => it is a price ceiling => it is legal since the government has prohibited it.

3) Minimum wage is a price floor as stated i point1). This is also legally binding.

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