Question

Suppose that, in a competitive market without government regulations, the equilibrium price of rental cars is $58 per day.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 and Binding or NotThe government prohibits car-rental companies from renting out rental cars for more than $87 per day. Price Control (Price Ceiling Or Price Floor)?_______ Binding or Not Binding?_______Due to new regulations, car-rental companies that would like to pay better wages in order to hire more workers are prohibited from doing so. Price Control (Price Ceiling Or Price Floor)?_______ Binding or Not Binding?_______The government has instituted a legal minimum price of $87 per day for rental cars. Price Control (Price Ceiling Or Price Floor)?_________ Binding or Not Binding?_______

Answer 1

Answer:

1. Price ceiling non binding

2. Price ceiling, binding

3. Price floor 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 if it is set below 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 minimum price.

If equilibrium price is $58 and the maximum price set by the government is $87. This is a price ceiling but it is not binding because it is above equilibrium price.

If the minimum price is $87. It is an example of A price floor and it is binding because it is set above equilibrium price.

If car rentals want to pay their workers more but can't do it because of new regulations, I it means it's a price ceiling and it is binding.

I hope my answer helps you