Question

Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon.Select whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.1. There are many teenagers who would like to work at gas stations, but the minimum-wage law sets the hourly wage at $24.00. 2. The government prohibits gas stations from selling gasoline for more than $2.50 per gallon. 3. The government has instituted a legal minimum price of $3.40 per gallon for gasoline.

Answer 1

Answer:

1) It is a price floor which is binding as employeer cannot hire teenagers willing to work below 24 dollars per hour

2) it is a price celling and is biding as the current equilibrium price is 3.00 There will be shortage as demand will icnrease for the lower price but supply decrease as it is not as profitable

3) it is a price floor which is also binding as the equilibrium is at 3 dollars the supplier will have to increase price and sales volume will be lower as demand will drop

Explanation: