Exam 5: Price Ceilings and Floors

When a crisis in the Middle East reduces the supply of oil,the price system rationally responds by reallocating oil from highest-value uses to lower-valued uses.

Rent control laws are most commonly a form of price ceiling.

Rent controls create large shortages in the long run rather than the short run because the long-run supply curve for apartments is inelastic.

During the energy crisis of the 1970s,President Nixon ordered gas stations to close between 9:00 PM Saturday and 12:01 AM Monday,in an attempt to prevent wasteful and unnecessary Sunday driving.This policy:

In 1974,there were ________ airline firms operating in the United States.

Why do you think full-service gas stations have largely disappeared across the United States?

The poor state of the economy was the dominant factor that caused the fall in the number of new apartments built in Ontario,Canada,during the first half of the 1970s.

Minimum wage laws are an example of price ceilings.

In the case of a nonbinding price floor,the price paid in the market will be:

Use the following to answer questions Figure: Price Ceilings and Valuation of Uses -(Figure: Price Ceilings and Valuation of Uses)Refer to the figure.Suppose a price ceiling of $15 goes into effect.If the goods are allocated only to the highest-value uses,the total consumer surplus in the market would be:

Under rent control,bribery is used to:

If prices are not allowed to rise because of a price ceiling,then:

Minimum wage laws cause ______ low-skilled employment.

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

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:

In the presence of a price floor,some suppliers are willing to take a lower price for their goods,but these trades never take place because they are illegal.This illustrates the problem of misallocation of resources.

Which of the following events occurred during the 1973-1974 oil crisis in the United States?

Shortages occur when prices are held below the market price,causing the quantity demanded to exceed the quantity supplied.This is a result of price:

Use the following to answer questions Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings)Refer to the figure.A price ceiling of $1 causes lost consumer surplus equal to area ________,and lost producer surplus equal to area ________.

In situations of excess demand,sellers might lower quality when they are unable to raise prices because they wish to: