Question

economics 2025-26 unit 3 study guide
b. short answer
answer in 2-4 sentences each.

1. explain why a binding price ceiling on apartments can lead to long waiting lists and discrimination by landlords.

1. give one real-world example of a price floor and briefly explain the surplus it can create.

c. multiple choice (circle the best answer)

1. which of the following is most likely to be a binding price ceiling?

a. a law that says gas cannot be sold for more than $10 per gallon when the market price is $3
b. a law that says rent cannot be more than $800 per month when the market rent is $1,200
c. a law that guarantees farmers a minimum price that is far below the market price
d. a law that requires price tags to be clearly displayed

1. a government sets a price floor on wheat above the market equilibrium price. what is the most likely long-run result?

a. a shortage of wheat and angry farmers
b. a surplus of wheat, and government programs to buy or store the excess
c. no effect on quantity supplied or demanded
d. higher quality wheat but less total wheat produced

Explanation:

Short Answer Questions (Answer-Explanation Format)

1. A binding price ceiling is set below the equilibrium market rent, making apartments cheaper than they would be otherwise. This lower price increases quantity demanded far beyond quantity supplied, creating a shortage that leads to long waiting lists. Since landlords can't compete on price, they use non-price methods like discrimination (choosing tenants based on personal preferences) to allocate the limited apartments.
2. A common real-world price floor is the minimum wage, which sets a legal lowest hourly rate for labor. When the minimum wage is set above the equilibrium wage for low-skill workers, the quantity of labor supplied (more workers seeking jobs) exceeds the quantity demanded (fewer jobs offered by employers), creating a surplus of labor—this shows up as increased unemployment for that group.

1. A binding price ceiling must be set below the current market price to restrict the market. Option B sets rent below the market rate, while Option A is above market price (non-binding), Option C is a price floor, and Option D is not a price control.
2. A price floor set above equilibrium increases quantity supplied and decreases quantity demanded, creating a surplus. In the long run, governments often intervene to buy or store the excess agricultural goods like wheat to support farmers.

Answer:

1. A binding apartment price ceiling is set below equilibrium rent, causing quantity demanded to outstrip supply and create a shortage, which leads to long waiting lists. With prices fixed below market value, landlords cannot compete on price, so they use discriminatory non-price criteria to select tenants, as they have more applicants than available units.
2. A real-world example is the minimum wage: when set above the equilibrium wage for low-skill labor, it creates a surplus of labor (unemployment), since more workers are willing to work at the higher wage than employers are willing to hire.

---

Multiple Choice Questions (Answer-Explanation Format)