equilibrium price and quantity of air travel?

6. A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen

televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium

price and quantity of flat screen TVs?

7. What is the effect of a price ceiling on the quantity demanded of the product? What is the effect of a price

ceiling on the quantity supplied? Why exactly does a price ceiling cause a shortage?

8. Does a price ceiling change the equilibrium price?

9. What would be the impact of imposing a price floor below the equilibrium price?

10. Does a price ceiling increase or decrease the number of transactions in a market? Why? What about a

price floor?

11. If a price floor benefits producers, why does a price floor reduce social surplus?

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3 • Review Questions 81

Review Questions

12. What determines the level of prices in a market?
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