What are price controls? How do they affect a market?
What will be an ideal response?
Price controls are non-market price impositions. When price controls hold, the incentives that equilibrium prices provide to buyers and sellers are eliminated. If a price control is imposed above the equilibrium price of a good, the quantity supplied of the good exceeds the quantity demanded of the good. This represents a surplus in the market. If a price control is imposed below the equilibrium price of a good, the quantity demanded of the good exceeds the quantity supplied of the good. This results in a shortage in the market.
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If the change in the y-axis variable is 6 and the change in the x-axis variable is 5, the slope of this line is 6/5
Indicate whether the statement is true or false
Which of the following describes how a negative externality affects a competitive market?
A) The externality causes a difference between the private cost of production and the social cost. B) The externality causes a difference between the private cost of production and the private benefit from consumption. C) The externality causes consumer surplus to exceed producer surplus. D) The externality causes a difference between the private cost of production and the equilibrium price.