A price ceiling will have NO immediate effect if: a. it is set above the equilibrium price. b. the equilibrium price is above th
e price ceiling. c. it is set below the equilibrium price. d. it creates a shortage.
1 answer:
Answer:
A. Set above equilibrium price
Explanation:
A price ceiling is a mandatory maximum price that a seller is allowed to charge. Generally, a government may impose this in order to protect consumers, especially with regards to the purchase of essential goods.
If the price ceiling was set below the equilibrium price (option c) or if the equilibrium price is above the price ceiling (option b), it will immediately cause a shortage (option d) since the quantity demanded would be higher than the quantity supplied when the price falls. This is because people will be willing to purchase more since it is cheaper but suppliers will be willing to produce less due to lower profits. Hence, options b, c and d are eliminated.
Option A is correct because... (please refer attached diagram):
When the price ceiling is above the equilibrium price, suppliers are willing to supply more since they can make higher profits but consumers will reduce purchasing since it is expensive. However, it does not cause any immediate effect because it takes time for suppliers to be able to produce more and cannot be done immediately unless anticipated in advance. In the long run however, quantity demanded will fall from equilibrium quantity to D1 and quantity supplied will rise from equilibrium quantity to S1. Hence, causing a surplus between D1 - S1 in the long run.
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Answer:
Explanation:
A.) Answer to question A is attached.
B.) The price of the pie is $10 according to the question. Please note that in a competitive market, a firm produces that level of output at which price equals MC. I.e P = MC. Where there is no such output, then it will produce up to the level in which P>MC.
Therefore, price(P) is equal to MC, P = MC up to the production of 5 pies.
So, producers in the market = 300 ÷ 5
= 60.
Profit = ( 5 × 10 ) - ( 5 × 7.8 )
= 50 - 39
= $11
Therefore, at a price of $10, 300 pies are sold in the market. Each producers makes 5 pies, so there are 60 producers in the market, each making a profit of $11.
C.) In a competitive market, and in the long run, price = minimum ATC.
Here, the minimum ATC is $7, but the price is $10.
The above means that the market is not in the long run equilibrium because price (P) is not equal to the minimum ATC. Thus in the long run, more firms will enter the market until the price equals ATC.
D.) Producers operating = 600 ÷ 2
= 300
It therefore means that in the long run, each producer earns a profit of $0. The market price is $7, while at this price, 600 pies are sold in the market, and each producer makes 2 pies , hence there are 300 producers in operation.
Answer:
a) 39.304%
b) 67.91%
c) 14.17%
Explanation:
a. Given"
Offer terms = 1.8/10
Now,
The Effective annual interest rate is given as:
=
on substituting the respective values, we get
=
= 0.39304
or
= 39.304%
similarly,
b. for 2.8/10 net 30
Effective annual interest rate =
= 0.6791
or
= 67.91%
c. for 1.8/10 net 60
Effective annual interest rate =
= 0.1417
or
= 14.17%