Question 1

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound.The government's actions will:

Accepted Answer

A) improve efficiency since the low prices will force producers to find cheaper production methods. 
B) result in coffee surpluses,even in a coffee-rich country. 
C) cause coffee shortages,even in a coffee-rich country. 
D) improve equality between rich and poor since the poor can now afford coffee. 
A) improve efficiency since the low prices will force producers to find cheaper production methods. 
B) result in coffee surpluses,even in a coffee-rich country. 
C) cause coffee shortages,even in a coffee-rich country. 
D) improve equality between rich and poor since the poor can now afford coffee.

Question 2

Which example is a quantity control?

Accepted Answer

A) the Medicare reimbursement schedule for physicians 
B) the minimum wage 
C) unemployment insurance 
D) limits on the number of red snappers that can be caught in the Gulf of Mexico 
A) the Medicare reimbursement schedule for physicians 
B) the minimum wage 
C) unemployment insurance 
D) limits on the number of red snappers that can be caught in the Gulf of Mexico

Question 3

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55.This price floor will:

Accepted Answer

A) cause a surplus of corn. 
B) cause a shortage of corn. 
C) have no immediate effect on the price of corn. 
D) increase the supply of corn. 
A) cause a surplus of corn. 
B) cause a shortage of corn. 
C) have no immediate effect on the price of corn. 
D) increase the supply of corn.

Question 4

(Figure: The Market for Milk)Use Figure: The Market for Milk.With a binding price floor,the price could be equal to _____,consumers would demand _____,and producers would supply _____.

Accepted Answer

A) P1;Q1;Q3 
B) P2;Q2;Q2 
C) P1;Q3;Q1 
D) P3;Q3;Q1 
A) P1;Q1;Q3 
B) P2;Q2;Q2 
C) P1;Q3;Q1 
D) P3;Q3;Q1

Question 5

(Table: Quantity Supplied and Quantity Demanded)Use Table: Quantity Supplied and Quantity Demanded.The government institutes a price floor,and as a result,too many resources are allocated for the production of the good.Given this,which dollar amount is a possible value of the price floor in this market?

Accepted Answer

A) $5. 
B) $10. 
C) $15. 
D) $20. 
A) $5. 
B) $10. 
C) $15. 
D) $20.

Question 6

Quantity controls set below the equilibrium quantity do NOT cause:

Accepted Answer

A) incentives for illegal activities. 
B) missed opportunities in the form of mutually beneficial transactions that don't occur. 
C) the supply price of the quantity transacted to exceed the demand price of the quantity transacted. 
D) quota rents. 
A) incentives for illegal activities. 
B) missed opportunities in the form of mutually beneficial transactions that don't occur. 
C) the supply price of the quantity transacted to exceed the demand price of the quantity transacted. 
D) quota rents.

Question 7

Use the following to answer question:  
-(Table: Quantity Supplied and Quantity Demanded)Use Table: Quantity Supplied and Quantity Demanded.If a price ceiling of $10 is imposed in this market:

Accepted Answer

A) the quantity demanded will be greater than the quantity supplied. 
B) the quantity supplied will be greater than the quantity demanded. 
C) an equilibrium quantity will result. 
D) excess supply equal to 25 units will result. 
A) the quantity demanded will be greater than the quantity supplied. 
B) the quantity supplied will be greater than the quantity demanded. 
C) an equilibrium quantity will result. 
D) excess supply equal to 25 units will result.

Question 8

Use the following to answer question:  
-(Table: The Market for Soda)Use Table: The Market for Soda.If the government imposes a price ceiling of $1 per can of soda,the quantity of soda demanded will be _____ cans.

Accepted Answer

A) 10 
B) 8 
C) 6 
D) 4 
A) 10 
B) 8 
C) 6 
D) 4

Question 9

Quotas are more effective than price controls because,unlike price controls,quotas do not cause deadweight loss.

Accepted Answer

A) True 
 B)False

Question 10

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:

Accepted Answer

A) it is inefficient. 
B) the transaction takes place on a black market. 
C) there is an increase in quantity demanded. 
D) there is a decrease in quantity demanded. 
A) it is inefficient. 
B) the transaction takes place on a black market. 
C) there is an increase in quantity demanded. 
D) there is a decrease in quantity demanded.

Question 11

A rent ceiling must be set above the equilibrium rent to be binding.

Accepted Answer

A) True 
 B)False

Question 12

A persistent shortage may occur if:

Accepted Answer

A) the government imposes a price ceiling below the equilibrium price. 
B) the government imposes a price floor below the equilibrium price. 
C) demand keeps falling. 
D) supply shifts rightward. 
A) the government imposes a price ceiling below the equilibrium price. 
B) the government imposes a price floor below the equilibrium price. 
C) demand keeps falling. 
D) supply shifts rightward.

Question 13

The amount that consumers are willing to pay for the quota limit quantity is the:

Accepted Answer

A) demand price. 
B) supply price. 
C) quota rent. 
D) price ceiling. 
A) demand price. 
B) supply price. 
C) quota rent. 
D) price ceiling.

Question 14

Which statement is a reason for governments imposing or maintaining price controls?

Accepted Answer

A) Some consumers and producers can benefit from price controls. 
B) Price controls prevent the deadweight loss that occurs when the market is in equilibrium. 
C) The government earns revenue from price controls. 
D) Price controls improve the efficiency of the market. 
A) Some consumers and producers can benefit from price controls. 
B) Price controls prevent the deadweight loss that occurs when the market is in equilibrium. 
C) The government earns revenue from price controls. 
D) Price controls improve the efficiency of the market.

Question 15

Use the following to answer question:  
-(Table: The Market for Soda)Use Table: The Market for Soda.If the government imposes a price floor of $1 per can of soda,there will be:

Accepted Answer

A) a shortage of two cans. 
B) a shortage of three cans. 
C) a surplus of three cans. 
D) equilibrium in the market for soda. 
A) a shortage of two cans. 
B) a shortage of three cans. 
C) a surplus of three cans. 
D) equilibrium in the market for soda.

Question 16

Use the following to answer question:  
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds,the quota rent per pound is:

Accepted Answer

A) $17.50. 
B) $10. 
C) $7.50. 
D) $0. 
A) $17.50. 
B) $10. 
C) $7.50. 
D) $0.

Question 17

Rapidly increasing health costs have been a major political concern since at least 1992.Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40.What is MOST likely to happen?

Accepted Answer

A) More people will try to visit the doctor,but there will be fewer doctors willing to see patients at that price. 
B) The same number of people will try to visit the doctor,and the same number of doctors are willing to see patients at that price. 
C) More people will be able to see the doctor,since the price is lower. 
D) Fewer people will try to see the doctor,and fewer doctors are willing to see patients at that price. 
A) More people will try to visit the doctor,but there will be fewer doctors willing to see patients at that price. 
B) The same number of people will try to visit the doctor,and the same number of doctors are willing to see patients at that price. 
C) More people will be able to see the doctor,since the price is lower. 
D) Fewer people will try to see the doctor,and fewer doctors are willing to see patients at that price.

Question 18

Use the following to answer question:  
-(Figure: Price Controls)Use Figure: Price Controls.An effective price floor would be at price _____ and a _____ would result from the difference between points _____.

Accepted Answer

A) c;surplus;f and e 
B) b;surplus;f and e 
C) d;shortage;i and h 
D) b;shortage;f and e 
A) c;surplus;f and e 
B) b;surplus;f and e 
C) d;shortage;i and h 
D) b;shortage;f and e

Question 19

In the rental housing market with price controls,the quantity of rental houses demanded exceeds the quantity of rental housing supplied.This price control must be a:

Accepted Answer

A) price ceiling. 
B) price floor. 
C) quota. 
D) quantity control. 
A) price ceiling. 
B) price floor. 
C) quota. 
D) quantity control.

Question 20

Rent controls usually set a price ceiling below the equilibrium price,and therefore:

Accepted Answer

A) quantity supplied exceeds the quantity demanded. 
B) quantity demanded exceeds the quantity supplied. 
C) a surplus of rental units will result. 
D) all low-income recipients will clearly be helped. 
A) quantity supplied exceeds the quantity demanded. 
B) quantity demanded exceeds the quantity supplied. 
C) a surplus of rental units will result. 
D) all low-income recipients will clearly be helped.

Exam 5: Price Controls and Quotas: Meddling With Markets

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound.The government's actions will:

Which example is a quantity control?

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55.This price floor will:

(Figure: The Market for Milk)Use Figure: The Market for Milk.With a binding price floor,the price could be equal to _____,consumers would demand _____,and producers would supply _____.

Quantity controls set below the equilibrium quantity do NOT cause:

Use the following to answer question: -(Table: Quantity Supplied and Quantity Demanded)Use Table: Quantity Supplied and Quantity Demanded.If a price ceiling of $10 is imposed in this market:

Use the following to answer question: -(Table: The Market for Soda)Use Table: The Market for Soda.If the government imposes a price ceiling of $1 per can of soda,the quantity of soda demanded will be _____ cans.

Quotas are more effective than price controls because,unlike price controls,quotas do not cause deadweight loss.

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:

A rent ceiling must be set above the equilibrium rent to be binding.

A persistent shortage may occur if:

The amount that consumers are willing to pay for the quota limit quantity is the:

Which statement is a reason for governments imposing or maintaining price controls?

Use the following to answer question: -(Table: The Market for Soda)Use Table: The Market for Soda.If the government imposes a price floor of $1 per can of soda,there will be:

Use the following to answer question: -(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds,the quota rent per pound is:

Rapidly increasing health costs have been a major political concern since at least 1992.Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40.What is MOST likely to happen?

Use the following to answer question: -(Figure: Price Controls)Use Figure: Price Controls.An effective price floor would be at price _____ and a _____ would result from the difference between points _____.

In the rental housing market with price controls,the quantity of rental houses demanded exceeds the quantity of rental housing supplied.This price control must be a:

Rent controls usually set a price ceiling below the equilibrium price,and therefore:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

(Figure: The Market for Milk)Use Figure: The Market for Milk.With a binding price floor,the price could be equal to ___,consumers would demand _,and producers would supply ___.

Use the following to answer question: -(Figure: Price Controls)Use Figure: Price Controls.An effective price floor would be at price ___ and a _ would result from the difference between points ___.