Price Floors: Airline Fares Practice Questions

In the 1970s, AirCal and Pacific Southwest Airlines flew only within California. As we mentioned, the federal price floors didn’t apply to flights within just one state. A major route for these airlines was flying from San Francisco to Los Angeles, a distance of 350 miles. This is about the same distance as from Chicago, Illinois, to Cleveland, Ohio. Which flight had a nicer meal? *

a. San Francisco-to-Los Angeles flight

b. Chicago-to-Cleveland flight

Airline regulation of the 1970s produced a similar result to which of the following government interventions? *

a. Rent control laws

b. Minimum wage laws

c. Communism

d. The Affordable Care Act

President Jimmy Carter didn’t just deregulate airline prices. He also deregulated much of the trucking industry, as well. Trucks carry almost all of the consumer goods that you purchase, so almost every time you purchase something, you’re paying money to a trucking company. Based on what happened in the airline industry after prices were deregulated, what do you think happened in the trucking industry after deregulation? You can find some answers here: https://www.econlib.org/library/Enc1/TruckingDeregulation.html. For another look that is critical of trucking deregulation, but comes to basically the same answers, see Michael Belzer, 2000. Sweatshops on Wheels: Winners and Losers in Trucking Deregulation, Thousand Oaks,CA: SAGE. *

a. Trucking salaries increased

b. Trucking salaries decreased

c. Trucking companies increased

d. Trucking companies decreased

e. B and C

Who do you think asked Congress and the president to keep price floors for trucking? *

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Practice Questions

Price Floors: Airline Fares Practice Questions

Introduction

Supply, Demand, and Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Price Floors

Trade

Externalities

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Labor Markets

Public Goods and the Tragedy of the Commons

Asymmetric Information

Consumer Choice

Bonus Topics

Exam