Question 1

Figure 6-14  
-Refer to Figure 6-14.If the horizontal line on the graph represents a price floor,then the price floor is

Accepted Answer

A) binding and creates a shortage of 20 units of the good. 
B) binding and creates a shortage of 40 units of the good. 
C) not binding but creates a shortage of 40 units of the good. 
D) not binding,and there will be no surplus or shortage of the good. 
A) binding and creates a shortage of 20 units of the good. 
B) binding and creates a shortage of 40 units of the good. 
C) not binding but creates a shortage of 40 units of the good. 
D) not binding,and there will be no surplus or shortage of the good.

Question 2

Which of the following is not a function of prices in a market system?

Accepted Answer

A) Prices have the crucial job of balancing supply and demand. 
B) Prices send signals to buyers and sellers to help them make rational economic decisions. 
C) Prices coordinate economic activity. 
D) Prices ensure an equal distribution of goods and services among consumers. 
A) Prices have the crucial job of balancing supply and demand. 
B) Prices send signals to buyers and sellers to help them make rational economic decisions. 
C) Prices coordinate economic activity. 
D) Prices ensure an equal distribution of goods and services among consumers.

Question 3

Figure 6-7  
-Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

Accepted Answer

A) the quantity of the good supplied decreases by 20 units. 
B) the demand curve shifts to the left;quantity sold is now 30 units and the price is $5. 
C) buyers' total expenditure on the good decreases by $80. 
D) the price of the good continues to serve as the rationing mechanism. 
A) the quantity of the good supplied decreases by 20 units. 
B) the demand curve shifts to the left;quantity sold is now 30 units and the price is $5. 
C) buyers' total expenditure on the good decreases by $80. 
D) the price of the good continues to serve as the rationing mechanism.

Question 4

After a binding price floor becomes effective,a

Accepted Answer

A) smaller quantity of the good is bought and sold. 
B) a larger quantity of the good is demanded. 
C) a smaller quantity of the good is supplied. 
D) All of the above are correct. 
A) smaller quantity of the good is bought and sold. 
B) a larger quantity of the good is demanded. 
C) a smaller quantity of the good is supplied. 
D) All of the above are correct.

Question 5

Figure 6-3
 
-Refer to Figure 6-3.In panel (a),there will be

Accepted Answer

A) a shortage. 
B) equilibrium in the market. 
C) a surplus. 
D) lines of people waiting to buy the good. 
A) a shortage. 
B) equilibrium in the market. 
C) a surplus. 
D) lines of people waiting to buy the good.

Question 6

If the government removes a binding price ceiling from a market,then the price paid by buyers will

Accepted Answer

A) increase,and the quantity sold in the market will increase. 
B) increase,and the quantity sold in the market will decrease. 
C) decrease,and the quantity sold in the market will increase. 
D) decrease,and the quantity sold in the market will decrease. 
A) increase,and the quantity sold in the market will increase. 
B) increase,and the quantity sold in the market will decrease. 
C) decrease,and the quantity sold in the market will increase. 
D) decrease,and the quantity sold in the market will decrease.

Question 7

In response to a shortage caused by the imposition of a binding price ceiling on a market,

Accepted Answer

A) price will no longer be the mechanism that rations scarce resources. 
B) long lines of buyers may develop. 
C) sellers could ration the good or service according to their own personal biases. 
D) All of the above are correct. 
A) price will no longer be the mechanism that rations scarce resources. 
B) long lines of buyers may develop. 
C) sellers could ration the good or service according to their own personal biases. 
D) All of the above are correct.

Question 8

To say that a price ceiling is binding is to say that the price ceiling

Accepted Answer

A) results in a surplus. 
B) is set above the equilibrium price. 
C) causes quantity demanded to exceed quantity supplied. 
D) All of the above are correct. 
A) results in a surplus. 
B) is set above the equilibrium price. 
C) causes quantity demanded to exceed quantity supplied. 
D) All of the above are correct.

Question 9

Figure 6-8  
-Refer to Figure 6-8.When a certain price control is imposed on this market,the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity.If P1 - P2 = $3,then the price control is

Accepted Answer

A) a price ceiling of $2.00. 
B) a price ceiling of $5.00. 
C) a price floor of $5.00. 
D) either a price ceiling of $2.00 or a price floor of $5.00. 
A) a price ceiling of $2.00. 
B) a price ceiling of $5.00. 
C) a price floor of $5.00. 
D) either a price ceiling of $2.00 or a price floor of $5.00.

Question 10

Which of the following is not correct? In a 2006 survey of Ph.D.economists,

Accepted Answer

A) 47 percent favored eliminating the minimum wage. 
B) 14 percent would maintain the minimum wage at its current level. 
C) 38 percent would increase the minimum wage. 
D) 10 percent would decrease the minimum wage. 
A) 47 percent favored eliminating the minimum wage. 
B) 14 percent would maintain the minimum wage at its current level. 
C) 38 percent would increase the minimum wage. 
D) 10 percent would decrease the minimum wage.

Question 11

Figure 6-2  
-Refer to Figure 6-2.The price ceiling

Accepted Answer

A) causes a shortage of 40 units. 
B) is not binding,because it is set above the equilibrium price. 
C) causes a shortage of 45 units. 
D) causes a shortage of 85 units. 
A) causes a shortage of 40 units. 
B) is not binding,because it is set above the equilibrium price. 
C) causes a shortage of 45 units. 
D) causes a shortage of 85 units.

Question 12

Figure 6-3
 
-Refer to Figure 6-3.A binding price floor is shown in

Accepted Answer

A) both panel (a)and panel (b). 
B) panel (a)only. 
C) panel (b)only. 
D) neither panel (a)nor panel (b). 
A) both panel (a)and panel (b). 
B) panel (a)only. 
C) panel (b)only. 
D) neither panel (a)nor panel (b).

Question 13

Figure 6-11  
-Refer to Figure 6-11.If the government imposes a price floor at $10,it would be

Accepted Answer

A) binding if market demand is Demand A or Demand B. 
B) non-binding if market demand is Demand A or Demand B. 
C) binding if market demand is Demand A and non-binding if market demand is Demand B. 
D) non-binding if market demand is Demand A and binding if market demand is Demand B. 
A) binding if market demand is Demand A or Demand B. 
B) non-binding if market demand is Demand A or Demand B. 
C) binding if market demand is Demand A and non-binding if market demand is Demand B. 
D) non-binding if market demand is Demand A and binding if market demand is Demand B.

Question 14

In the housing market,supply and demand are

Accepted Answer

A) more elastic in the short run than in the long run,and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B) more elastic in the short run than in the long run,and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C) more elastic in the long run than in the short run,and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D) more elastic in the long run than in the short run,and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
A) more elastic in the short run than in the long run,and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B) more elastic in the short run than in the long run,and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C) more elastic in the long run than in the short run,and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D) more elastic in the long run than in the short run,and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Question 15

An outcome that can result from either a price ceiling or a price floor is

Accepted Answer

A) a surplus in the market. 
B) a shortage in the market. 
C) a nonbinding price control. 
D) long lines of frustrated buyers. 
A) a surplus in the market. 
B) a shortage in the market. 
C) a nonbinding price control. 
D) long lines of frustrated buyers.

Question 16

In a competitive market free of government regulation,

Accepted Answer

A) price adjusts until quantity demanded is greater than quantity supplied. 
B) price adjusts until quantity demanded is less than quantity supplied. 
C) price adjusts until quantity demanded equals quantity supplied. 
D) supply adjusts to meet demand at every price. 
A) price adjusts until quantity demanded is greater than quantity supplied. 
B) price adjusts until quantity demanded is less than quantity supplied. 
C) price adjusts until quantity demanded equals quantity supplied. 
D) supply adjusts to meet demand at every price.

Question 17

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13.Which of the following price ceilings would be binding in this market?

Accepted Answer

A) $4 
B) $5 
C) $6 
D) $7 
A) $4 
B) $5 
C) $6 
D) $7

Question 18

Under rent control,landlords cease to be responsive to tenants' concerns about the quality of the housing because

Accepted Answer

A) with rent control,the government guarantees landlords a minimum level of profit. 
B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C) with shortages and waiting lists,they have no incentive to maintain and improve their property. 
D) with rent control,it becomes the government's responsibility to maintain rental housing. 
A) with rent control,the government guarantees landlords a minimum level of profit. 
B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C) with shortages and waiting lists,they have no incentive to maintain and improve their property. 
D) with rent control,it becomes the government's responsibility to maintain rental housing.

Question 19

Figure 6-4  
-Refer to Figure 6-4.A government-imposed price of $6 in this market is an example of a

Accepted Answer

A) binding price ceiling that creates a shortage. 
B) non-binding price ceiling that creates a shortage. 
C) binding price floor that creates a surplus. 
D) non-binding price floor that creates a surplus. 
A) binding price ceiling that creates a shortage. 
B) non-binding price ceiling that creates a shortage. 
C) binding price floor that creates a surplus. 
D) non-binding price floor that creates a surplus.

Question 20

A binding minimum wage

Accepted Answer

A) alters both the quantity demanded and quantity supplied of labor. 
B) affects only the quantity of labor demanded;it does not affect the quantity of labor supplied. 
C) has no effect on the quantity of labor demanded or the quantity of labor supplied. 
D) causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of workers. 
A) alters both the quantity demanded and quantity supplied of labor. 
B) affects only the quantity of labor demanded;it does not affect the quantity of labor supplied. 
C) has no effect on the quantity of labor demanded or the quantity of labor supplied. 
D) causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of workers.

Exam 6: Supply Demand and Government Policies: Controls on Prices

Figure 6-14 -Refer to Figure 6-14.If the horizontal line on the graph represents a price floor,then the price floor is

Which of the following is not a function of prices in a market system?

Figure 6-7 -Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

After a binding price floor becomes effective,a

Figure 6-3 -Refer to Figure 6-3.In panel (a),there will be

If the government removes a binding price ceiling from a market,then the price paid by buyers will

In response to a shortage caused by the imposition of a binding price ceiling on a market,

To say that a price ceiling is binding is to say that the price ceiling

Which of the following is not correct? In a 2006 survey of Ph.D.economists,

Figure 6-2 -Refer to Figure 6-2.The price ceiling

Figure 6-3 -Refer to Figure 6-3.A binding price floor is shown in

Figure 6-11 -Refer to Figure 6-11.If the government imposes a price floor at $10,it would be

In the housing market,supply and demand are

An outcome that can result from either a price ceiling or a price floor is

In a competitive market free of government regulation,

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13.Which of the following price ceilings would be binding in this market?

Under rent control,landlords cease to be responsive to tenants' concerns about the quality of the housing because

Figure 6-4 -Refer to Figure 6-4.A government-imposed price of $6 in this market is an example of a

A binding minimum wage

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B