1. Suppose the government has imposed a price ceiling on cellular phones.
Which of the following events could
transform the price ceiling from one that is binding to one that is not binding?
a. Cellular phones become more popular.
b. Traditional land line phones become more expensive.
c. The components used to produce cellular phones become more expensive.
d. A technological advance makes cellular phone production less expensive.
Figure 6-5
12 Price
10 Supply
2 Demand
60 120 180 Quantity
70 160
2. Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling is
a. binding and creates a surplus of 40 units of the good.
b. binding and creates a surplus of 90 units of the good.
c. not binding but creates a surplus of 40 units of the good.
d. not binding, and there will be no surplus or shortage of the good.
Figure 6-12
price of gasoline
S2
P3 S1
P2
price ceiling
P1
D
Q3 Q1 quantity of gasoline
3. Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts
from S1 to S2,
a. the market price will increase to P3.
b. a surplus will occur at the new market price of P2.
c. the market price will stay at P1.
d. a shortage will occur at the new market price of P2.
Figure 7-1
P
350
300
250
200
150
100
50 Demand
1 2 3 4 5 Q
4. Refer to Figure 7-1. If the price of the good is $250, then consumer surplus amounts to
a. $50.
b. $100.
c. $150.
d. $200.
Figure 7-6
Price
250
225
200
175
150
125
100
75
50
25
Demand
25 50 75 100 125 150 Quantity
5. Refer to Figure 7-6. What is the consumer surplus if the price is $100?
a. $2,500
b. $5,000
c. $10,000
d. $20,000
Figure 7-7
Price
15 Supply
14
13
12
11
10
9
8
7
6
5
4
3
2
1
1 2 3 4 Quantity
6. Refer to Figure 7-7. If the price of the good is $9.50, then producer surplus is
a. $2.50. c. $8.00.
b. $6.50. d. $10.00.
