Consider the market for hamburgers. Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $5 each, and employees at fast-food restaurants earn $21.50 per hour.

Indicate whether each of the statements is an example of a price ceiling or a price floor and whether it results in a shortage or a surplus or has no effect on the price and quantity that prevail in the market.

(a) There are many teenagers who would like to work at fast-food restaurants, but the minimum-wage law sets the hourly wage at $21.50.

(b) The government has instituted a legal minimum price of $5 each for hamburgers.

(c) The government prohibits fast-food restaurants from selling hamburgers for more than $8 each.

(a) FLOOR

This prevent the business to hire person which marginal revenue is lower than their floor cost of $21.50 It causes a shortage of teenagers employeers as they can offer their labor (supply) for a price which company's would demand (lower than 21.50) but they cannnot. Therefore, restaurant has to employ other persons.

(b) FLOOR

The company cannot sale below this amount therefore it cannot compte with others if they can create a cost structure to provide hamburgers below 5 dollars

(c) CELLING

If the cost structure of the good increase or demand increase the company's won't provide at the given price for the entire market hence, there will be a shortage of hamburguers

Explanation:

a. Price floor, has no effect on the prices and quantity.

b.Price floor, results in surplus on quantity and no effect in prices.

c. Price ceiling, results in shortage on quantity.

Explanation:

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