Suppose that the market equilibrium price for a good is $3.00. A nonbinding price ceiling in this market will result in a price
set Choose one:A. below $3.00.B. above $3.00.C. More information is needed to determine the answer.D. at $3.00.
2 answers:
Answer:
A) below $3.00
Explanation:
In order for a price ceiling to be binding, it must be set below the market's equilibrium price. A binding price ceiling results in a supply shortage because the total quantity demanded will increase, while the total quantity supplied will decrease. The economic loss resulting from the shortage is known as deadweight loss.
The deadweight loss is represented on the attached graph as the area below the demand curve and above the supply curve, and left of the equilibrium price.
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Answer: The answer is as follows:
Explanation:
From these numbers, we can conclude that USA has a comparative in producing cars and France has a comparative advantage in producing bottles.
Opportunity cost shows that how many units of one good have to be foregone in order to produce one additional unit of other good.
In USA:
Opportunity cost of producing bottles =
= 0.75
Opportunity cost of producing cars =
= 1.33
In France:
Opportunity cost of producing bottles =
= 0.55
Opportunity cost of producing cars =
= 1.8
Above calculations clearly shows that USA has a lower opportunity in producing 1 unit of car as compared to the France, so it has a comparative advantage in producing cars.
Whereas, France has a lower opportunity in producing 1 unit of bottle as compared to the USA, so it has a comparative advantage in producing Bottles.