If the Intended Aim of the Price Ceiling Set at $6

question 1

Multiple Choice

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, then positive analysis would conclude that the policy was:

• A) effective because the surplus gained by consumers through lower prices is greater than the surplus they lost due to fewer transactions taking place.
• B) ineffective because the surplus gained by consumers through lower prices is less than the surplus they lost due to fewer transactions taking place.
• C) effective because the surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
• D) ineffective because the amount of deadweight loss is greater than the surplus gained by consumers from lower prices.

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Definitions:

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is true.

Chi-Squared Distribution

A probability distribution widely used in statistical hypothesis tests, particularly in tests of independence and goodness of fit.

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution, necessary for calculating statistics like variances.

Chi-Squared Distribution

A probability distribution that measures how a model compares to actual observed data, primarily used in the goodness-of-fit testing.