Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon. 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	Binding or Not
Due to new regulations, gas stations that would like to pay better wages in order to hire more workers are prohibited from doing so.	price ceiling/price floor	binding/non
The government has instituted a legal minimum price of $2.70 per gallon for gasoline.
The government prohibits gas stations from selling gasoline for more than $3.40 per gallon.

A microeconomic equilibrium means that supply and demand have been allowed to determine the equilibrium quantity EQ and the equilibrium price EP. If the government intervenes, they may choose to set controls on the prices that sellers may charge.

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Binding Price control say a binding price ceiling implies that the market is forced to clear at a pr... View the full answer