Question

The language of price controls Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $7 each.
Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.
1. The government has instituted a legal minimum price of $8 each for hamburgers.
2. There are many teenagers who would like to work at fast-food restaurants, but they are not hired due to minimum-wage laws.
3. The government prohibits fast-food restaurants from selling hamburgers for more than $8 each.

Answer 1

Answer:

The government has instituted a legal minimum price of $8 each for hamburgers - price floor binding

There are many teenagers who would like to work at fast-food restaurants, but they are not hired due to minimum-wage laws. - price floor binding

The government prohibits fast-food restaurants from selling hamburgers for more than $8 each - price ceiling, non binding

Explanation:

A price ceiling is when the government or an agency of the government sets the maximum price for a good or service. Price ceiling is binding when it is set above equilibrium price.

A price floor is when the government or an agency of the government sets the minimum price for a good or service. Price floor is binding when it is set above equilibrium price.

Minimum wage is an example of price floor.

The equilibrium price of hamburgers is $7, while the minimum price set by the government is $8. This shows that it is a price floor and it is binding. The government sets the maximum price that fast food should sell hamburgers which is $8. This is an example of A price ceiling but it is not binding because it is above equilibrium price.

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Answer 2

The classification of the given statements would be as follows:

1). The government has instituted a legal minimum price of $8 each for hamburgers - price floor and binding

2). There are many teenagers who would like to work at fast-food restaurants, but they are not hired due to minimum-wage laws. - price floor and binding

3). The government prohibits fast-food restaurants from selling hamburgers for more than $8 each - price ceiling and non-binding

What are the price ceiling and price floor?

The price ceiling is defined as the limit that the government fixes as the maximum for a particular good while the price floor is characterized as the minimal amount that the government to be paid for a specific good.

"Binding" stands for something compulsory while non-binding is not compulsory.

The legal minimum price and wage would be binding and exemplify price-floor.

The maximum price set for hamburgers exemplifies the price floor and is non-binding because it lies above the level of equilibrium.

Learn more about "Equilibrium" here:

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