Question 1

Licenses allowing taxis to operate issued by New York City in the 1930s are called medallions.

Accepted Answer

A) True 
 B)False

Question 2

The quota rent is:

Accepted Answer

A)  the difference between the demand price and the supply price at the quota limit. 
B)  the rent received by landlords who own rent-controlled apartments. 
C)  the opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota. 
D)  the minimum rent that the owner of a building must receive before he or she is willing to rent out the building. 
A)  the difference between the demand price and the supply price at the quota limit. 
B)  the rent received by landlords who own rent-controlled apartments. 
C)  the opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota. 
D)  the minimum rent that the owner of a building must receive before he or she is willing to rent out the building.

Question 3

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  quota. 
D)  tariff. 
A)  price floor. 
B)  price ceiling. 
C)  quota. 
D)  tariff.

Question 4

Use the following to answer questions:
Figure: The Market for Sandwiches  
-(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches. Suppose a price floor is set at $7. At this price, consumer surplus is equal to _____ and producer surplus is equal to _____.

Accepted Answer

A)  $64; $40 
B)  $64; $24 
C)  $32; $24 
D)  $32; $40 
A)  $64; $40 
B)  $64; $24 
C)  $32; $24 
D)  $32; $40

Question 5

Price controls are always set below the market equilibrium price.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions:  
-(Table: Quantity Supplied and Quantity Demanded) Look at the 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 7

Use the following to answer questions:
Table: Market for Apartments  
-(Table: Market for Apartments) Look at the table Market for Apartments. If a government price ceiling of $600 is imposed on this market, the result will be an inefficiency in the form of a _____ million apartments.

Accepted Answer

A)  surplus of 0.6 
B)  surplus of 0.8 
C)  shortage of 0.8 
D)  shortage of 0.6 
A)  surplus of 0.6 
B)  surplus of 0.8 
C)  shortage of 0.8 
D)  shortage of 0.6

Question 8

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

Accepted Answer

A)  consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price. 
B)  producers will respond to the lower price and offer more units for sale. 
C)  consumers will be able to purchase more of the good after the price ceiling is imposed. 
D)  it will not be binding. 
A)  consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price. 
B)  producers will respond to the lower price and offer more units for sale. 
C)  consumers will be able to purchase more of the good after the price ceiling is imposed. 
D)  it will not be binding.

Question 9

Use the following to answer questions:
Figure: Rent Controls  
-(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent3:

Accepted Answer

A)  the shortage of rental units is the distance Q3 - Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q3 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  rent will remain at Rent2. 
A)  the shortage of rental units is the distance Q3 - Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q3 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  rent will remain at Rent2.

Question 10

An effective price floor would result in:

Accepted Answer

A)  a surplus of the good. 
B)  a shortage of the good. 
C)  a quantity control. 
D)  an equilibrium price. 
A)  a surplus of the good. 
B)  a shortage of the good. 
C)  a quantity control. 
D)  an equilibrium price.

Question 11

The American Medical Association licenses doctors. This licensing has probably led to lower earnings for doctors over time.

Accepted Answer

A) True 
 B)False

Question 12

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 will 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 13

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 14

How do price ceilings cause black markets?

Accepted Answer

A price ceiling causes a shortage of the

Question 15

If a quota is set above the equilibrium quantity, there will be:

Accepted Answer

A)  incentives for illegal activities. 
B)  missed opportunities in the form of mutually beneficial transactions that don't occur. 
C)  a supply price for the quantity transacted that will exceed the demand price of the quantity transacted. 
D)  no effect. 
A)  incentives for illegal activities. 
B)  missed opportunities in the form of mutually beneficial transactions that don't occur. 
C)  a supply price for the quantity transacted that will exceed the demand price of the quantity transacted. 
D)  no effect.

Question 16

Use the following to answer question:  
-(Table: Quantity Supplied and Quantity Demanded) Look at the 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 a good. The price floor in this market must be equal to:

Accepted Answer

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

Question 17

Use the following to answer questions:
Figure: Rent Controls  
-(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent1:

Accepted Answer

A)  the shortage of rental units is the distance Q3 - Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q1 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  there will be a surplus of rental units, but it is impossible to tell how large the surplus is based on the information provided. 
A)  the shortage of rental units is the distance Q3 - Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q1 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  there will be a surplus of rental units, but it is impossible to tell how large the surplus is based on the information provided.

Question 18

Use the following to answer questions:
Figure: The Market for Butter  
-(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.30 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

Accepted Answer

A)  surplus; 4.5 
B)  surplus; 6.0 
C)  shortage; 6.0 
D)  shortage; 4.5 
A)  surplus; 4.5 
B)  surplus; 6.0 
C)  shortage; 6.0 
D)  shortage; 4.5

Question 19

A price ceiling benefits all consumers.

Accepted Answer

A) True 
 B)False

Question 20

An effective price ceiling will most likely result in:

Accepted Answer

A)  an increase in producer surplus. 
B)  an increase in consumer surplus. 
C)  a decrease in consumer surplus. 
D)  no change in either producer or consumer surplus. 
A)  an increase in producer surplus. 
B)  an increase in consumer surplus. 
C)  a decrease in consumer surplus. 
D)  no change in either producer or consumer surplus.

Licenses allowing taxis to operate issued by New York City in the 1930s are called medallions.

The quota rent is:

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches. Suppose a price floor is set at $7. At this price, consumer surplus is equal to _ and producer surplus is equal to _.

Price controls are always set below the market equilibrium price.

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

Use the following to answer questions: Table: Market for Apartments -(Table: Market for Apartments) Look at the table Market for Apartments. If a government price ceiling of $600 is imposed on this market, the result will be an inefficiency in the form of a _____ million apartments.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent₃:

An effective price floor would result in:

The American Medical Association licenses doctors. This licensing has probably led to lower earnings for doctors over time.

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 will happen?

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

How do price ceilings cause black markets?

If a quota is set above the equilibrium quantity, there will be:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent₁:

Use the following to answer questions: Figure: The Market for Butter -(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.30 is imposed on this market, an inefficiency will result in the form of a _ of _ million pounds of butter.

A price ceiling benefits all consumers.

An effective price ceiling will most likely result in:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Elasticity

Taxes

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 5: Price Controls and Quotas: Meddling With Markets

Licenses allowing taxis to operate issued by New York City in the 1930s are called medallions.

The quota rent is:

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches. Suppose a price floor is set at $7. At this price, consumer surplus is equal to _____ and producer surplus is equal to _____.

Price controls are always set below the market equilibrium price.

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

Use the following to answer questions: Table: Market for Apartments -(Table: Market for Apartments) Look at the table Market for Apartments. If a government price ceiling of $600 is imposed on this market, the result will be an inefficiency in the form of a _____ million apartments.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent3:

An effective price floor would result in:

The American Medical Association licenses doctors. This licensing has probably led to lower earnings for doctors over time.

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 will happen?

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

How do price ceilings cause black markets?

If a quota is set above the equilibrium quantity, there will be:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent1:

Use the following to answer questions: Figure: The Market for Butter -(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.30 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

A price ceiling benefits all consumers.

An effective price ceiling will most likely result in:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Elasticity

Taxes

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches. Suppose a price floor is set at $7. At this price, consumer surplus is equal to _ and producer surplus is equal to _.

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent₃:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent₁:

Use the following to answer questions: Figure: The Market for Butter -(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.30 is imposed on this market, an inefficiency will result in the form of a _ of _ million pounds of butter.