1. The language of price controlsSuppose that, in a competitive market without government regulations, the equilibrium price of milk is $2.50 per gallon.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 ornonbinding.StatementPrice ControlBinding or NotThe government has instituted a legal minimum price of $2.30 per gallon for milk.Price ceilingDue to new regulations, grocery stores that would like to pay better wages in order to hiremore workers are prohibited from doing so.The government prohibits grocery stores from selling milk for more than $2.30 per gallon.

Statement Price Control Binding or Not The government has instituted a legal minimum price of $2.30 per gallon for milk. Price ceiling Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from doing so. The government prohibits grocery stores from selling milk for more than $2.30 per gallon.

Statement Price Control Binding or Not The government has instituted a legal minimum price of $2.30 per gallon for milk. Price ceiling Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from doing so. The government prohibits grocery stores from selling milk for more than $2.30 per gallon.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 7PA

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Question

1. The language of price controls
Suppose that, in a competitive market without government regulations, the equilibrium price of milk is $2.50 per gallon.
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.
Statement
Price Control
Binding or Not
The government has instituted a legal minimum price of $2.30 per gallon for milk.
Price ceiling
Due to new regulations, grocery stores that would like to pay better wages in order to hire
more workers are prohibited from doing so.
The government prohibits grocery stores from selling milk for more than $2.30 per gallon.

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