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  3. for the questions below answer either true or false if...

Question: for the questions below answer either true or false if...

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For the questions below, answer either true or false. If you answer true, explain why it is true. If you answer false, give a counter-example. In all three examples you may assume demand slopes downward and supply slopes upward (that is, neither curve is either perfectly vertical or horizontal), and that both curves are smooth (like they are in the rent control questions, not discrete like they were in homework 2). A. In the simple model of supply and demand covered in this class, a binding price ceiling will . In the simple model of supply and demand covered in this class, a binding price ceiling will . In the simple model of supply and demand covered in this class, a binding price ceiling will always decrease total surplus always decrease producer surplus always decrease consumer surplus Rent control (and similar price ceilings) are often proposed as a way to reduce inequality by making housing more affordable for the poor. But given your answers to Questions 1-7, can rent control also increase some forms of inequality? (Hint: think about what excess demand/a shortage implies for people seeking an apartment.) B. C. In lecture I gave you steps for calculating the deadweight loss of a price ceiling. Suppose instead there were a binding price floor (that is, the price is held above the equilibrium price). Propose a set of steps for calculating the deadweight loss of a binding price floor. (Hint: draw a diagram with a binding price floor, identify the deadweight loss triangle, and think about how the steps given in lecture must be adjusted to calculate the base and height of that triangle.)
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