Podcast
Questions and Answers
What is a primary consequence of price ceilings in a market?
What is a primary consequence of price ceilings in a market?
Which of the following is NOT a result of price ceilings?
Which of the following is NOT a result of price ceilings?
What term describes the illegal buying and selling of goods at prices above the established ceiling?
What term describes the illegal buying and selling of goods at prices above the established ceiling?
In the context of price ceilings, what inefficiency arises from high demand and low supply?
In the context of price ceilings, what inefficiency arises from high demand and low supply?
Signup and view all the answers
Why might a consumer who values a good highly not receive it under price ceilings?
Why might a consumer who values a good highly not receive it under price ceilings?
Signup and view all the answers
What is the quota rent per pound of lobster when 80,000 pounds are sold?
What is the quota rent per pound of lobster when 80,000 pounds are sold?
Signup and view all the answers
What is total surplus at equilibrium?
What is total surplus at equilibrium?
Signup and view all the answers
What is total surplus with a price ceiling of $3?
What is total surplus with a price ceiling of $3?
Signup and view all the answers
What is total surplus with a quota of 3?
What is total surplus with a quota of 3?
Signup and view all the answers
Are minimum wages price ceilings or floors?
Are minimum wages price ceilings or floors?
Signup and view all the answers
What is the demand price for 10 million rides per year?
What is the demand price for 10 million rides per year?
Signup and view all the answers
At a price of $5, how many rides will drivers offer?
At a price of $5, how many rides will drivers offer?
Signup and view all the answers
What represents the quota rent?
What represents the quota rent?
Signup and view all the answers
If Ali makes $4/day from driving a taxi and $2/day from renting out his medallion, what is his total income if he does not drive for one day?
If Ali makes $4/day from driving a taxi and $2/day from renting out his medallion, what is his total income if he does not drive for one day?
Signup and view all the answers
What is the minimum amount Jean would offer for the medallion to make it worthwhile for Ali to rent it out?
What is the minimum amount Jean would offer for the medallion to make it worthwhile for Ali to rent it out?
Signup and view all the answers
What happens if Ali does not rent his medallion?
What happens if Ali does not rent his medallion?
Signup and view all the answers
In the context of medallion renting, what is a potential consequence for Ali if he charges too high a rental price?
In the context of medallion renting, what is a potential consequence for Ali if he charges too high a rental price?
Signup and view all the answers
How does the concept of opportunity cost relate to Ali's decision about renting his medallion?
How does the concept of opportunity cost relate to Ali's decision about renting his medallion?
Signup and view all the answers
What is one of the direct effects of rent control?
What is one of the direct effects of rent control?
Signup and view all the answers
What type of price control was implemented by the U.S. government when it bought cheese?
What type of price control was implemented by the U.S. government when it bought cheese?
Signup and view all the answers
Which statement best describes binding price ceilings?
Which statement best describes binding price ceilings?
Signup and view all the answers
After the implementation of rent control, what typically happens to producer surplus?
After the implementation of rent control, what typically happens to producer surplus?
Signup and view all the answers
Who primarily benefits from the government buying cheese?
Who primarily benefits from the government buying cheese?
Signup and view all the answers
What is a consequence of price ceilings on the market?
What is a consequence of price ceilings on the market?
Signup and view all the answers
What is a likely consequence of long waiting lists for rent-controlled housing?
What is a likely consequence of long waiting lists for rent-controlled housing?
Signup and view all the answers
What is the definition of 'efficiency' in market terms?
What is the definition of 'efficiency' in market terms?
Signup and view all the answers
What characterizes a non-binding price ceiling?
What characterizes a non-binding price ceiling?
Signup and view all the answers
What effect does a price ceiling typically have on quantity sold in a market?
What effect does a price ceiling typically have on quantity sold in a market?
Signup and view all the answers
What criticism is associated with rent control as expressed by Assar Lindbeck?
What criticism is associated with rent control as expressed by Assar Lindbeck?
Signup and view all the answers
Which group benefits the most from rental price ceilings?
Which group benefits the most from rental price ceilings?
Signup and view all the answers
What might be a side effect of a price ceiling on essential goods?
What might be a side effect of a price ceiling on essential goods?
Signup and view all the answers
What happens to consumer surplus after rent control is enacted?
What happens to consumer surplus after rent control is enacted?
Signup and view all the answers
Which of the following best describes a price floor?
Which of the following best describes a price floor?
Signup and view all the answers
What is deadweight loss in the context of price controls?
What is deadweight loss in the context of price controls?
Signup and view all the answers
Which of the following is an example of a binding price ceiling?
Which of the following is an example of a binding price ceiling?
Signup and view all the answers
What is the effect of converting apartments into condominiums on renting?
What is the effect of converting apartments into condominiums on renting?
Signup and view all the answers
What determines the quota rent in a market with fixed quotas?
What determines the quota rent in a market with fixed quotas?
Signup and view all the answers
In the NYC taxi market, what is required for a taxi to operate legally?
In the NYC taxi market, what is required for a taxi to operate legally?
Signup and view all the answers
What impact does the quota have on the market for taxi rides?
What impact does the quota have on the market for taxi rides?
Signup and view all the answers
What happens to medallion prices if the number of medallions is limited?
What happens to medallion prices if the number of medallions is limited?
Signup and view all the answers
What is the probable effect of Uber and Lyft operating without medallions in the NYC market?
What is the probable effect of Uber and Lyft operating without medallions in the NYC market?
Signup and view all the answers
How can individuals buy and sell licenses in a quota system?
How can individuals buy and sell licenses in a quota system?
Signup and view all the answers
What is the effect of maintaining a quota when the demand for taxi rides is increasing?
What is the effect of maintaining a quota when the demand for taxi rides is increasing?
Signup and view all the answers
What happens to the supply curve in the presence of a quota in the taxi market?
What happens to the supply curve in the presence of a quota in the taxi market?
Signup and view all the answers
If the price of a ride is set at $5.00 in a quota market, how many rides will passengers demand?
If the price of a ride is set at $5.00 in a quota market, how many rides will passengers demand?
Signup and view all the answers
What is the purpose of setting a quota in economic markets?
What is the purpose of setting a quota in economic markets?
Signup and view all the answers
Study Notes
Price Controls and Quotas
- Price controls are restrictions on how high or low a price can be.
- Price ceilings: maximum price.
- Price floors: minimum price.
- Quantity controls (quotas): restriction on how much a company can sell.
- Efficiency: no remaining opportunities to improve someone's situation without harming someone else.
Price Ceilings
- Shortages (inefficiently low quantity).
- Inefficient allocation to customers (those who value the good the most may not get it).
- Wasted resources (bribery, long lines, etc.).
- Inefficiently low quality.
- Black markets.
Price Floors
- Deadweight loss from inefficiently low quantity demanded.
- Inefficient allocation of sales among sellers.
- Wasted resources.
- Inefficiently high quality.
- Temptation to break the law by selling below the legal price.
Black Markets
- Goods or services bought and sold illegally, either because they are prohibited or the equilibrium price is illegal.
Binding vs. Non-binding
- Binding: the control makes a difference (e.g., a $50 minimum wage, capping college tuition at $5k/yr).
- Non-binding: the control does not make a difference (e.g., a $2 minimum wage, capping college tuition at $5m/yr).
Quota Rents
- Quota rent is the gap between the demand and supply price.
- Government sets a quota limit and issues licenses to supply the good.
Quotas in the NYC Taxi Market
- NYC issues a limited number of medallions for taxis.
- Taxis must have a valid medallion for operation.
- Uber and Lyft operate without medallions.
Effects of Price Controls
-
Price ceilings often lead to shortages, inefficient allocation of goods, quality concerns, black markets, and wasted resources.
-
Price floors can create surpluses, inefficiency in allocation of sales, and wasted resources.
Impact of Rent Controls
- Rent controls can lead to:
- Poorer quality rental housing.
- Long waiting lists.
- Fewer new rental units being built for the poor.
- Apartment conversions to condominiums.
Minimum Wages
- Minimum wages are price floors.
- They can lead to unemployment, particularly for low-skilled workers.
Other related topics
- The impact of minimum wages on employment, -Opinions of economists on minimum wages. -The effectiveness of other policies to assist low-income workers.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz explores the concepts of price controls, including price ceilings and floors, as well as quantity controls on markets. It also discusses the implications of these controls, such as inefficiencies and the emergence of black markets. Test your understanding of the effects of these economic policies!
