Question 1

A deadweight loss is the total of:

Accepted Answer

A)  consumer and producer surplus when all mutually profitable gains from trade are exploited. 
B)  consumer and producer surplus when all mutually profitable gains from trade are not exploited. 
C)  lost consumer and producer surplus when all mutually profitable gains from trade are exploited. 
D)  lost consumer and producer surplus when all mutually profitable gains from trade are not exploited. 
A)  consumer and producer surplus when all mutually profitable gains from trade are exploited. 
B)  consumer and producer surplus when all mutually profitable gains from trade are not exploited. 
C)  lost consumer and producer surplus when all mutually profitable gains from trade are exploited. 
D)  lost consumer and producer surplus when all mutually profitable gains from trade are not exploited.

Question 2

Price floors on airlines:

Accepted Answer

A)  kept ticket prices much lower than unregulated ticket prices. 
B)  caused airlines to compete by offering customers higher-quality services,such as better meals and wider seats. 
C)  reduced the quality of airline services (for example,less frequent flights,peanuts instead of meals). 
D)  gave airlines an incentive to lower ticket prices to increase ticket sales. 
A)  kept ticket prices much lower than unregulated ticket prices. 
B)  caused airlines to compete by offering customers higher-quality services,such as better meals and wider seats. 
C)  reduced the quality of airline services (for example,less frequent flights,peanuts instead of meals). 
D)  gave airlines an incentive to lower ticket prices to increase ticket sales.

Question 3

Puerto Rico's minimum wage increased dramatically as result of the 1938 Fair Labor Standards Act.This legislation:

Accepted Answer

A)  caused many Puerto Rican firms to go bankrupt,sending unemployment soaring. 
B)  is a case in point that minimum wage increases have different effects in non-capitalist countries. 
C)  provided a counterexample to the claim that minimum wage increases cause unemployment. 
D)  had little effect on Puerto Rican labor markets because the minimum wage increase was quite modest. 
A)  caused many Puerto Rican firms to go bankrupt,sending unemployment soaring. 
B)  is a case in point that minimum wage increases have different effects in non-capitalist countries. 
C)  provided a counterexample to the claim that minimum wage increases cause unemployment. 
D)  had little effect on Puerto Rican labor markets because the minimum wage increase was quite modest.

Question 4

The shortage of oil ended when:

Accepted Answer

A)  Ronald Reagan eliminated price controls on oil in January 1981. 
B)  the government instituted minimum miles-per-gallon requirements for cars. 
C)  Congress passed the Energy Saver Act of 1985. 
D)  the U.S.Senate began regulating oil industry profits. 
A)  Ronald Reagan eliminated price controls on oil in January 1981. 
B)  the government instituted minimum miles-per-gallon requirements for cars. 
C)  Congress passed the Energy Saver Act of 1985. 
D)  the U.S.Senate began regulating oil industry profits.

Question 5

Which statement(s)is TRUE? Price floors set above the equilibrium price cause: I.shortages.
II.surpluses.
III.deadweight losses.

Accepted Answer

A)  I and III only 
B)  II and III only 
C)  III only 
D)  I is true if demand is elastic;however,II is true if demand is inelastic. 
A)  I and III only 
B)  II and III only 
C)  III only 
D)  I is true if demand is elastic;however,II is true if demand is inelastic.

Question 6

When a price ceiling is in effect,quantity ______ will be greater than quantity ______,creating a ______.

Accepted Answer

A)  supplied;demanded;surplus 
B)  demanded;supplied;shortage 
C)  supplied;demanded;shortage 
D)  demanded;supplied;surplus 
A)  supplied;demanded;surplus 
B)  demanded;supplied;shortage 
C)  supplied;demanded;shortage 
D)  demanded;supplied;surplus

Question 7

Dramatic price increases,such as those seen in the markets for gas and oil in the 1970s,are typically the result of:

Accepted Answer

A)  price gouging by big businesses. 
B)  shortages. 
C)  reductions in supply. 
D)  foreign intervention in markets. 
A)  price gouging by big businesses. 
B)  shortages. 
C)  reductions in supply. 
D)  foreign intervention in markets.

Question 8

The U.S.government establishes a price floor of $1,000 on personal computers.The market price for netbooks (personal computers that specialize in Internet and other basic computer functions)is about $500.How would this price control affect the netbook market?

Accepted Answer

A)  Consumers would have a harder time finding conventional netbooks since MOST would be too powerful. 
B)  There would be long lines for netbooks. 
C)  Producers would leave the market for netbooks. 
D)  There would be no notable effect. 
A)  Consumers would have a harder time finding conventional netbooks since MOST would be too powerful. 
B)  There would be long lines for netbooks. 
C)  Producers would leave the market for netbooks. 
D)  There would be no notable effect.

Question 9

In the late 1500s,the city of Antwerp was under siege by the Duke of Parma.The siege caused the price of food to rise so the government of Antwerp established a price ceiling set at a value similar to that before the siege.(This bears a striking resemblance to modern anti-gouging laws used in times of disaster. )Merchants,fearing the Duke's ability to sink their ships,refused to ferry food into the city that they could only sell at a normal price.Which important effect of a price control BEST describes this story?

Accepted Answer

A)  reduction of product quality 
B)  wasteful lines 
C)  a loss in gains from trade 
D)  a misallocation of resources 
A)  reduction of product quality 
B)  wasteful lines 
C)  a loss in gains from trade 
D)  a misallocation of resources

Question 10

If a price ceiling on gasoline results in long lines at the gas station and a rich businessman and an elderly retiree both need gasoline,who would have the higher-valued use for gasoline,and who would have the lower opportunity cost of waiting in line?

Accepted Answer

A)  The businessman would have the higher-valued use and the lower opportunity cost. 
B)  The businessman would have the higher-valued use and the retiree would have the lower opportunity cost. 
C)  The retiree would have the higher-valued use and the lower opportunity cost. 
D)  The retiree would have the higher-valued use and the businessman would have the lower opportunity cost. 
A)  The businessman would have the higher-valued use and the lower opportunity cost. 
B)  The businessman would have the higher-valued use and the retiree would have the lower opportunity cost. 
C)  The retiree would have the higher-valued use and the lower opportunity cost. 
D)  The retiree would have the higher-valued use and the businessman would have the lower opportunity cost.

Question 11

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 the deadweight loss after the price ceiling of $4 has been implemented?

Accepted Answer

A)  $160 
B)  $180 
C)  $20 
D)  $10 
A)  $160 
B)  $180 
C)  $20 
D)  $10

Question 12

When he was president,Richard Nixon froze all prices and wages in the United States.

Accepted Answer

A) True 
 B)False

Question 13

Figure: Labor Market 3   Refer to the figure.In the diagram,a minimum wage of $7 causes a deadweight loss of:

Accepted Answer

A)  W + X. 
B)  X + Z. 
C)  V + Y. 
D)  Y + W. 
A)  W + X. 
B)  X + Z. 
C)  V + Y. 
D)  Y + W.

Question 14

The Soviet Union's experience with price controls demonstrated that,with careful planning,shortages and surpluses were a rare event.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions 
Figure: Supply and Demand 2  
-(Figure: Supply and Demand 2)If the government sets the price at $8 in this figure,the total value of the wasted time is:

Accepted Answer

A)  $36. 
B)  $48. 
C)  $64. 
D)  $8. 
A)  $36. 
B)  $48. 
C)  $64. 
D)  $8.

Question 16

Which events occurred during the 1973-1974 oil crisis in the United States? I.Gas stations were ordered to be closed between 9 PM on Saturday and 12:01 AM on Monday.
II.The government decided to allocate oil by command.
III.The 55 mph speed limit was repealed.
IV.Daylight savings time was implemented.

Accepted Answer

A)  I and IV only 
B)  I,II,and III only 
C)  I,II,and IV only 
D)  I,III,and IV only 
A)  I and IV only 
B)  I,II,and III only 
C)  I,II,and IV only 
D)  I,III,and IV only

Question 17

Use the following to answer questions 
Figure: Losses from Price Ceilings  
-(Figure: Losses from Price Ceilings)Refer to the figure.At a price ceiling of $1,the area representing the total value of wasted time is ________,and the area of the deadweight loss is ________.

Accepted Answer

A)  ab;de 
B)  bd;ce 
C)  abdf;ce 
D)  bc;de 
A)  ab;de 
B)  bd;ce 
C)  abdf;ce 
D)  bc;de

Question 18

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Accepted Answer

A) True 
 B)False

Question 19

Price ceilings are always good for consumer welfare.

Accepted Answer

A) True 
 B)False

Question 20

When a price floor is in effect:

Accepted Answer

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

A deadweight loss is the total of:

Price floors on airlines:

Puerto Rico's minimum wage increased dramatically as result of the 1938 Fair Labor Standards Act.This legislation:

The shortage of oil ended when:

Which statement(s)is TRUE? Price floors set above the equilibrium price cause: I.shortages. II.surpluses. III.deadweight losses.

When a price ceiling is in effect,quantity will be greater than quantity ,creating a __.

Dramatic price increases,such as those seen in the markets for gas and oil in the 1970s,are typically the result of:

The U.S.government establishes a price floor of $1,000 on personal computers.The market price for netbooks (personal computers that specialize in Internet and other basic computer functions)is about $500.How would this price control affect the netbook market?

If a price ceiling on gasoline results in long lines at the gas station and a rich businessman and an elderly retiree both need gasoline,who would have the higher-valued use for gasoline,and who would have the lower opportunity cost of waiting in line?

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 the deadweight loss after the price ceiling of $4 has been implemented?

When he was president,Richard Nixon froze all prices and wages in the United States.

Figure: Labor Market 3 Refer to the figure.In the diagram,a minimum wage of $7 causes a deadweight loss of:

The Soviet Union's experience with price controls demonstrated that,with careful planning,shortages and surpluses were a rare event.

Use the following to answer questions Figure: Supply and Demand 2 -(Figure: Supply and Demand 2)If the government sets the price at $8 in this figure,the total value of the wasted time is:

Use the following to answer questions Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings)Refer to the figure.At a price ceiling of $1,the area representing the total value of wasted time is ,and the area of the deadweight loss is .

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Price ceilings are always good for consumer welfare.

When a price floor is in effect:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 5: Price Ceilings and Floors

A deadweight loss is the total of:

Price floors on airlines:

Puerto Rico's minimum wage increased dramatically as result of the 1938 Fair Labor Standards Act.This legislation:

The shortage of oil ended when:

Which statement(s)is TRUE? Price floors set above the equilibrium price cause: I.shortages. II.surpluses. III.deadweight losses.

When a price ceiling is in effect,quantity ______ will be greater than quantity ______,creating a ______.

Dramatic price increases,such as those seen in the markets for gas and oil in the 1970s,are typically the result of:

The U.S.government establishes a price floor of $1,000 on personal computers.The market price for netbooks (personal computers that specialize in Internet and other basic computer functions)is about $500.How would this price control affect the netbook market?

If a price ceiling on gasoline results in long lines at the gas station and a rich businessman and an elderly retiree both need gasoline,who would have the higher-valued use for gasoline,and who would have the lower opportunity cost of waiting in line?

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 the deadweight loss after the price ceiling of $4 has been implemented?

When he was president,Richard Nixon froze all prices and wages in the United States.

Figure: Labor Market 3 Refer to the figure.In the diagram,a minimum wage of $7 causes a deadweight loss of:

The Soviet Union's experience with price controls demonstrated that,with careful planning,shortages and surpluses were a rare event.

Use the following to answer questions Figure: Supply and Demand 2 -(Figure: Supply and Demand 2)If the government sets the price at $8 in this figure,the total value of the wasted time is:

Use the following to answer questions Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings)Refer to the figure.At a price ceiling of $1,the area representing the total value of wasted time is ________,and the area of the deadweight loss is ________.

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Price ceilings are always good for consumer welfare.

When a price floor is in effect:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

When a price ceiling is in effect,quantity will be greater than quantity ,creating a __.

Use the following to answer questions Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings)Refer to the figure.At a price ceiling of $1,the area representing the total value of wasted time is ,and the area of the deadweight loss is .