Question 1

Discuss the inefficiencies created by a price floor.

Accepted Answer

A price floor prevents the efficient all

Question 2

Suppose the government imposes a price ceiling on gasoline that is less than the equilibrium price. As a result,

Accepted Answer

A)  the price of gasoline rises to the equilibrium price. 
B)  there is incentive for buyers to undertake search activity. 
C)  the supply of gasoline will increase and the supply curve will shift rightward. 
D)  the demand for gasoline will decrease and the demand curve will shift leftward. 
A)  the price of gasoline rises to the equilibrium price. 
B)  there is incentive for buyers to undertake search activity. 
C)  the supply of gasoline will increase and the supply curve will shift rightward. 
D)  the demand for gasoline will decrease and the demand curve will shift leftward.

Question 3

If enforcement is aimed at buyers of an illegal good, the result will be

Accepted Answer

A)  an increase in the short-run supply of the good. 
B)  a decrease in the short-run supply of the good. 
C)  a decrease in demand for the good. 
D)  an increase in the price of the good. 
A)  an increase in the short-run supply of the good. 
B)  a decrease in the short-run supply of the good. 
C)  a decrease in demand for the good. 
D)  an increase in the price of the good.

Question 4

Consider the market for heart transplants. The demand for a heart transplant is perfectly inelastic and the supply curve is upward sloping. If a $1,000 tax per transplant tax is imposed on buyers (the recipients), how will the tax be divided between the buyer and seller?

Accepted Answer

A)  The sellers will pay the entire tax. 
B)  The buyers will pay the entire tax. 
C)  The tax will be evenly divided between the sellers and buyers. 
D)  More information is needed to determine how the tax is split. 
A)  The sellers will pay the entire tax. 
B)  The buyers will pay the entire tax. 
C)  The tax will be evenly divided between the sellers and buyers. 
D)  More information is needed to determine how the tax is split.

Question 5

-In the above figure, CBL is the cost of breaking the law. If it is illegal to buy and sell, then the quantity of the good bought and sold will be

Accepted Answer

A)  100. 
B)  200. 
C)  300. 
D)  400. 
A)  100. 
B)  200. 
C)  300. 
D)  400.

Question 6

-Using the above figure, CBL is the cost of breaking the law. What is the equilibrium price and quantity if beer is legal?

Accepted Answer

A)  $5 per quart and 300 quarts of beer 
B)  $3 per quart and 500 quarts of beer 
C)  $3 per quart and 100 quarts of beer 
D)  $1 per quart and 300 quarts of beer 
A)  $5 per quart and 300 quarts of beer 
B)  $3 per quart and 500 quarts of beer 
C)  $3 per quart and 100 quarts of beer 
D)  $1 per quart and 300 quarts of beer

Question 7

Good A has a perfectly inelastic demand and an upward-sloping supply curve. Good B has a perfectly inelastic supply and a downward-sloping demand curve. If the same sales tax is imposed on the sellers of both good A and good B, the price paid by

Accepted Answer

A)  buyers of good A rises by more than the price paid by buyers of good B. 
B)  buyers of good B rises by more than the price paid by buyers of good A. 
C)  buyers of good A rises by the same amount as the price paid by buyers of good B. 
D)  More information is needed to determine whether the price paid by buyers of good A rises by more than, less than, or the same amount as the price paid by buyers of good B. 
A)  buyers of good A rises by more than the price paid by buyers of good B. 
B)  buyers of good B rises by more than the price paid by buyers of good A. 
C)  buyers of good A rises by the same amount as the price paid by buyers of good B. 
D)  More information is needed to determine whether the price paid by buyers of good A rises by more than, less than, or the same amount as the price paid by buyers of good B.

Question 8

-The above figure shows the apartment market in Big City. What could the Big City Housing Authority do if it wants to reduce the rents paid by its citizens?

Accepted Answer

A)  impose a rent floor above $1350 
B)  impose a rent floor below $1350 
C)  impose a rent ceiling above $1350 
D)  impose a rent ceiling below $1350 
A)  impose a rent floor above $1350 
B)  impose a rent floor below $1350 
C)  impose a rent ceiling above $1350 
D)  impose a rent ceiling below $1350

Question 9

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The loss of producer surplus as a result of the price ceiling is

Accepted Answer

A)  $50,000 per month. 
B)  $250,000 per month. 
C)  $500,000 per month. 
D)  more than $500,000 per month. 
A)  $50,000 per month. 
B)  $250,000 per month. 
C)  $500,000 per month. 
D)  more than $500,000 per month.

Question 10

A rent ceiling creates a shortage. As a result, which of the following occurs?

Accepted Answer

A)  only a loss of consumer surplus for tenants 
B)  only a loss of producer surplus for landlords 
C)  a loss of both consumer and producer surplus 
D)  a gain of both consumer and producer surplus 
A)  only a loss of consumer surplus for tenants 
B)  only a loss of producer surplus for landlords 
C)  a loss of both consumer and producer surplus 
D)  a gain of both consumer and producer surplus

Question 11

A price ceiling ________.

Accepted Answer

A)  makes it illegal to charge a higher price than the specified price 
B)  is more effective when it is higher 
C)  is necessary to maintain market equilibrium 
D)  occurs in housing markets only 
A)  makes it illegal to charge a higher price than the specified price 
B)  is more effective when it is higher 
C)  is necessary to maintain market equilibrium 
D)  occurs in housing markets only

Question 12

In the housing market, if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00, why will nothing change?

Accepted Answer

A rent ceiling is the maximum legal rent

Question 13

If buyers of illegal goods are punished but sellers are not, then the price ________ and the equilibrium quantity ________.

Accepted Answer

A)  rises; increases 
B)  rises; decreases 
C)  falls; increases 
D)  falls; decreases 
A)  rises; increases 
B)  rises; decreases 
C)  falls; increases 
D)  falls; decreases

Question 14

-The above figure illustrates the labor market for fast food restaurants in a small city in Peru. What would be the effects of a minimum wage imposed at $5.50 per hour?

Accepted Answer

A)  unemployment equal to 400 hours 
B)  unemployment equal to 200 hours 
C)  a shortage of 400 hours 
D)  nothing because the minimum wage has no effect on the equilibrium price and quantity 
A)  unemployment equal to 400 hours 
B)  unemployment equal to 200 hours 
C)  a shortage of 400 hours 
D)  nothing because the minimum wage has no effect on the equilibrium price and quantity

Question 15

Suppose a tax is imposed on sellers. The more inelastic the demand for the taxed item, the

Accepted Answer

A)  greater the share of the tax paid by sellers. 
B)  smaller the deadweight loss from the tax. 
C)  larger the decrease in consumption because of the tax. 
D)  All of the above answers are correct. 
A)  greater the share of the tax paid by sellers. 
B)  smaller the deadweight loss from the tax. 
C)  larger the decrease in consumption because of the tax. 
D)  All of the above answers are correct.

Question 16

-The above figure shows the market for neckties after the government has imposed a tax. How much government revenue is generated by the tax?

Accepted Answer

A)  $1,000.00 per month 
B)  $800.00 per month 
C)  $500.00 per month 
D)  $400.00 per month 
A)  $1,000.00 per month 
B)  $800.00 per month 
C)  $500.00 per month 
D)  $400.00 per month

Question 17

-In the figure above, the demand curve shifts rightward from D0 to D1. There are no rent controls. In the short run, the increase in demand results in

Accepted Answer

A)  higher rents and a decrease in the equilibrium quantity. 
B)  lower rents and a decrease in the equilibrium quantity. 
C)  higher rents and an increase in the equilibrium quantity. 
D)  lower rents and an increase in the equilibrium quantity. 
A)  higher rents and a decrease in the equilibrium quantity. 
B)  lower rents and a decrease in the equilibrium quantity. 
C)  higher rents and an increase in the equilibrium quantity. 
D)  lower rents and an increase in the equilibrium quantity.

Question 18

In general, a fine on selling a product leads to the

Accepted Answer

A)  supply curve shifting rightward. 
B)  supply curve shifting leftward. 
C)  demand curve shifting rightward. 
D)  demand curve shifting leftward. 
A)  supply curve shifting rightward. 
B)  supply curve shifting leftward. 
C)  demand curve shifting rightward. 
D)  demand curve shifting leftward.

Question 19

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month, which causes a shortage. Suppose that apartments are an inferior good and incomes rise. The increase in income

Accepted Answer

A)  decreases the shortage. 
B)  has no effect on the shortage. 
C)  increases the shortage. 
D)  raises the rent. 
A)  decreases the shortage. 
B)  has no effect on the shortage. 
C)  increases the shortage. 
D)  raises the rent.

Question 20

Which of the following is NOT a potential impact of a rent ceiling set below the equilibrium rent?

Accepted Answer

A)  a surplus 
B)  an increase in search 
C)  a deadweight loss 
D)  None of the above because they are all impacts of a rent ceiling set below the equilibrium rent. 
A)  a surplus 
B)  an increase in search 
C)  a deadweight loss 
D)  None of the above because they are all impacts of a rent ceiling set below the equilibrium rent.

Exam 6: Government Actions in Markets

Discuss the inefficiencies created by a price floor.

Suppose the government imposes a price ceiling on gasoline that is less than the equilibrium price. As a result,

If enforcement is aimed at buyers of an illegal good, the result will be

Consider the market for heart transplants. The demand for a heart transplant is perfectly inelastic and the supply curve is upward sloping. If a $1,000 tax per transplant tax is imposed on buyers (the recipients), how will the tax be divided between the buyer and seller?

-In the above figure, CBL is the cost of breaking the law. If it is illegal to buy and sell, then the quantity of the good bought and sold will be

-Using the above figure, CBL is the cost of breaking the law. What is the equilibrium price and quantity if beer is legal?

Good A has a perfectly inelastic demand and an upward-sloping supply curve. Good B has a perfectly inelastic supply and a downward-sloping demand curve. If the same sales tax is imposed on the sellers of both good A and good B, the price paid by

-The above figure shows the apartment market in Big City. What could the Big City Housing Authority do if it wants to reduce the rents paid by its citizens?

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The loss of producer surplus as a result of the price ceiling is

A rent ceiling creates a shortage. As a result, which of the following occurs?

A price ceiling ________.

In the housing market, if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00, why will nothing change?

If buyers of illegal goods are punished but sellers are not, then the price ________ and the equilibrium quantity ________.

-The above figure illustrates the labor market for fast food restaurants in a small city in Peru. What would be the effects of a minimum wage imposed at $5.50 per hour?

Suppose a tax is imposed on sellers. The more inelastic the demand for the taxed item, the

-The above figure shows the market for neckties after the government has imposed a tax. How much government revenue is generated by the tax?

-In the figure above, the demand curve shifts rightward from D0 to D1. There are no rent controls. In the short run, the increase in demand results in

In general, a fine on selling a product leads to the

Which of the following is NOT a potential impact of a rent ceiling set below the equilibrium rent?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

If buyers of illegal goods are punished but sellers are not, then the price and the equilibrium quantity .

-In the figure above, the demand curve shifts rightward from D₀ to D₁. There are no rent controls. In the short run, the increase in demand results in