Answers to Study Review Guide

Answers to front page:

No response because $700 is above the equilibrium price.

Quantity demanded will rise to 55, quantity supplied will fall to 40, and the result is a shortage of 15 bicycles.

No, some are worse off because of the shortage (unable to purchase a bicycle at the lower price).

Quantity demanded will fall to 40, quantity supplied will rise to 70, and the result is a surplus of 30 bicycles.

No impact because the equilibrium price is already obeying the law.

Shortage, price falls, quantity demanded rises, quantity supplied falls.

Shortage, sellers are worse off because of the price fall, some buyers are worse off due to the shortage.

No impact because the equilibrium price is already obeying the law.

Surplus, price rises, quantity demanded falls, quantity supplied rises.

Answers to True/False

False (a price ceiling set above the market equilibrium price has no impact on the market)

False (shortage)

True

False (some teenagers cannot find a job due to unemployment caused by the price floor)

False (only if effective Pf > Pe)

Answers to Multiple Choice

1. B

2. A

3. D

4. B

5. C

6. C

7. E

8. A

9. C

10. E

11. D

12. A

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