Question 1

If a minimum wage is posted in the labor market:

Accepted Answer

A)  the demand for labor would increase. 
B)  the supply of labor would decrease. 
C)  a surplus of labor would develop. 
D)  All of the answers are correct. 
A)  the demand for labor would increase. 
B)  the supply of labor would decrease. 
C)  a surplus of labor would develop. 
D)  All of the answers are correct. C

Question 2

What does the Russian word blat refer to?

Accepted Answer

A)  a Russian brand of vodka 
B)  having connections that enable one to obtain favors 
C)  the amount of time people spend waiting in lines to buy 
D)  things There is no such word. 
A)  a Russian brand of vodka 
B)  having connections that enable one to obtain favors 
C)  the amount of time people spend waiting in lines to buy 
D)  things There is no such word. B

Question 3

Use the following to answer questions:
Figure: Costs of Price Ceilings 2  
-(Figure: Costs of Price Ceilings 2) Refer to the figure. What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

Accepted Answer

A)  $90 
B)  $10 
C)  $160 
D)  $80 
A)  $90 
B)  $10 
C)  $160 
D)  $80 B

Question 4

Do shortages caused by rent controls tend to be larger in the short run or the long run? Use a supply and demand diagram to help illustrate your answer.

Accepted Answer

Rent control creates larger shortages in

Question 5

If quantity supplied equals 80 units and quantity demanded equals 85 units under a price control, then it is a:

Accepted Answer

A)  binding price ceiling. 
B)  binding price floor. 
C)  nonbinding price ceiling. 
D)  nonbinding price floor. 
A)  binding price ceiling. 
B)  binding price floor. 
C)  nonbinding price ceiling. 
D)  nonbinding price floor.

Question 6

An economy with permanent, universal price controls is in essence a:

Accepted Answer

A)  market economy. 
B)  social economy. 
C)  free economy. 
D)  command economy. 
A)  market economy. 
B)  social economy. 
C)  free economy. 
D)  command economy.

Question 7

Which statement is correct regarding the restrictions on entry into the airline industry?

Accepted Answer

A)  Resources were equally allocated because new airlines were kept out of the industry. 
B)  Resources were misallocated because low-cost airlines were kept out of the industry. 
C)  Resources were efficiently allocated because high-cost airlines were kept out of the industry. 
D)  Resources were reallocated because only low-cost airlines were allowed to enter the industry. 
A)  Resources were equally allocated because new airlines were kept out of the industry. 
B)  Resources were misallocated because low-cost airlines were kept out of the industry. 
C)  Resources were efficiently allocated because high-cost airlines were kept out of the industry. 
D)  Resources were reallocated because only low-cost airlines were allowed to enter the industry.

Question 8

When a price ceiling is in effect:

Accepted Answer

A)  suppliers get too strong a signal from demanders about their needs. 
B)  demanders have no incentive to signal their needs to suppliers. 
C)  all of demanders' needs are met at the lower price, so there is no need to signal anything to suppliers. 
D)  demanders cannot signal their needs to suppliers. 
A)  suppliers get too strong a signal from demanders about their needs. 
B)  demanders have no incentive to signal their needs to suppliers. 
C)  all of demanders' needs are met at the lower price, so there is no need to signal anything to suppliers. 
D)  demanders cannot signal their needs to suppliers.

Question 9

The BEST way to help the poor afford housing is by:

Accepted Answer

A)  using rent control. 
B)  raising the minimum wage. 
C)  issuing housing vouchers. 
D)  raising payroll taxes. 
A)  using rent control. 
B)  raising the minimum wage. 
C)  issuing housing vouchers. 
D)  raising payroll taxes.

Question 10

Use the following to answer questions:
Figure: Supply and Demand 4  
-(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

Accepted Answer

A)  $54 
B)  $136 
C)  $36 
D)  $45 
A)  $54 
B)  $136 
C)  $36 
D)  $45

Question 11

What happened as a result of the elimination of price controls on oil and gasoline in 1981?

Accepted Answer

A)  The supply of gas and oil declined. 
B)  The shortage of gasoline was eliminated nearly overnight. 
C)  The price of oil increased dramatically, and stayed high until the early 1990s. 
D)  The shortage of gasoline was eliminated, but it took several years. 
A)  The supply of gas and oil declined. 
B)  The shortage of gasoline was eliminated nearly overnight. 
C)  The price of oil increased dramatically, and stayed high until the early 1990s. 
D)  The shortage of gasoline was eliminated, but it took several years.

Question 12

Likely the most significant example of federal price controls in the United States, in terms of value of regulated market, came under President:

Accepted Answer

A)  Barack Obama. 
B)  Richard Nixon. 
C)  Bill Clinton. 
D)  Ronald Reagan. 
A)  Barack Obama. 
B)  Richard Nixon. 
C)  Bill Clinton. 
D)  Ronald Reagan.

Question 13

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling, which means that price ceilings create lost gains from trade.

Accepted Answer

A) True 
 B)False

Question 14

The long-run supply curve for rent-controlled apartments is generally more inelastic than the short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 15

The price controls of the early 1970s caused:

Accepted Answer

A)  lead to be removed from gasoline. 
B)  the disappearance of the full-service gas station. 
C)  gas stations to stay open for more hours. 
D)  an excess supply of gasoline. 
A)  lead to be removed from gasoline. 
B)  the disappearance of the full-service gas station. 
C)  gas stations to stay open for more hours. 
D)  an excess supply of gasoline.

Question 16

Which is NOT a cost of binding price controls?

Accepted Answer

A)  misallocation 
B)  deadweight loss 
C)  search costs 
D)  equity costs 
A)  misallocation 
B)  deadweight loss 
C)  search costs 
D)  equity costs

Question 17

Use the following to answer questions:
Figure: Price Ceilings and Consumer Valuation  
-(Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated to buyers randomly, what is the total consumer surplus in this market?

Accepted Answer

A)  $90 
B)  $120 
C)  $30 
D)  $150 
A)  $90 
B)  $120 
C)  $30 
D)  $150

Question 18

Use the following to answer questions:
Figure: Price Ceilings and Random Allocation  
-(Figure: Price Ceilings and Random Allocation) Refer to the figure. When a controlled price is imposed and the quantity of goods is allocated randomly between the highest valued uses and lowest valued uses, total consumer surplus under random allocation is represented by area:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 19

When price floors are in effect, goods and services:

Accepted Answer

A)  are still allocated efficiently. 
B)  are not necessarily supplied by their lowest-cost producer. 
C)  do not necessarily flow to their highest-valued use. 
D)  are neither necessarily supplied by their lowest-cost producer nor do they flow to their highest-valued use. 
A)  are still allocated efficiently. 
B)  are not necessarily supplied by their lowest-cost producer. 
C)  do not necessarily flow to their highest-valued use. 
D)  are neither necessarily supplied by their lowest-cost producer nor do they flow to their highest-valued use.

Question 20

Labor unions are composed of high-skilled workers, but generally support minimum wage laws that typically affect only low-skilled workers. Their support makes more sense by considering that low-skilled labor is a ______ for high-skilled labor, and minimum wages ______ the quantity demanded of low-skilled labor.

Accepted Answer

A)  complement; increase 
B)  complement; decrease 
C)  substitute; increase 
D)  substitute; decrease 
A)  complement; increase 
B)  complement; decrease 
C)  substitute; increase 
D)  substitute; decrease

Exam 8: Price Ceilings and Floors

If a minimum wage is posted in the labor market:

What does the Russian word blat refer to?

Use the following to answer questions: Figure: Costs of Price Ceilings 2 -(Figure: Costs of Price Ceilings 2) Refer to the figure. What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

Do shortages caused by rent controls tend to be larger in the short run or the long run? Use a supply and demand diagram to help illustrate your answer.

If quantity supplied equals 80 units and quantity demanded equals 85 units under a price control, then it is a:

An economy with permanent, universal price controls is in essence a:

Which statement is correct regarding the restrictions on entry into the airline industry?

When a price ceiling is in effect:

The BEST way to help the poor afford housing is by:

Use the following to answer questions: Figure: Supply and Demand 4 -(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

What happened as a result of the elimination of price controls on oil and gasoline in 1981?

Likely the most significant example of federal price controls in the United States, in terms of value of regulated market, came under President:

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling, which means that price ceilings create lost gains from trade.

The long-run supply curve for rent-controlled apartments is generally more inelastic than the short-run supply curve.

The price controls of the early 1970s caused:

Which is NOT a cost of binding price controls?

When price floors are in effect, goods and services:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters