Question 1

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 2

A binding price floor leads to a(n):

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  equilibrium quantity. 
D)  quantity of zero units. 
A)  shortage. 
B)  surplus. 
C)  equilibrium quantity. 
D)  quantity of zero units.

Question 3

Use the following to answer question 
Figure: Supply and Demand 3  
-When an effective price ceiling causes a shortage,some of the buyers who value the good the most may not be able to get the good.Why does this occur?

Accepted Answer

A)  The highest-value users cannot outbid the lower-valued users and so the seller cannot distinguish between them. 
B)  The highest-value users are eliminated from the market due to the price ceiling. 
C)  The price ceiling causes the price to rise so high that even the highest-value users cannot afford the good. 
D)  The government purchases most of the goods. 
A)  The highest-value users cannot outbid the lower-valued users and so the seller cannot distinguish between them. 
B)  The highest-value users are eliminated from the market due to the price ceiling. 
C)  The price ceiling causes the price to rise so high that even the highest-value users cannot afford the good. 
D)  The government purchases most of the goods.

Question 4

Why do many consumers and politicians advocate for price controls?

Accepted Answer

A)  Price controls are the only way for the poor to obtain certain goods when prices rise. 
B)  Most consumers and politicians do not advocate for price controls,because they understand their negative consequences. 
C)  Price controls appear to be a straightforward response to the problem of price increases. 
D)  The gains in consumer surplus typically outweigh the loss in producer profits. 
A)  Price controls are the only way for the poor to obtain certain goods when prices rise. 
B)  Most consumers and politicians do not advocate for price controls,because they understand their negative consequences. 
C)  Price controls appear to be a straightforward response to the problem of price increases. 
D)  The gains in consumer surplus typically outweigh the loss in producer profits.

Question 5

A price ceiling creates a ________ when it is set ________.

Accepted Answer

A)  surplus;below the equilibrium price 
B)  surplus;above the equilibrium price 
C)  shortage;below the equilibrium price 
D)  shortage;above the equilibrium price 
A)  surplus;below the equilibrium price 
B)  surplus;above the equilibrium price 
C)  shortage;below the equilibrium price 
D)  shortage;above the equilibrium price

Question 6

Which statement is NOT an effect of a price ceiling?

Accepted Answer

A)  surpluses 
B)  misallocation of resources 
C)  loss of gains from trade 
D)  wasteful lineups 
A)  surpluses 
B)  misallocation of resources 
C)  loss of gains from trade 
D)  wasteful lineups

Question 7

Price controls cause resources to be misallocated by:

Accepted Answer

A)  distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay. 
B)  distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply. 
C)  distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to pay. 
D)  distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to supply. 
A)  distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay. 
B)  distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply. 
C)  distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to pay. 
D)  distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to supply.

Question 8

A legal maximum price at which a good can be sold is a price:

Accepted Answer

A)  stabilization. 
B)  ceiling. 
C)  support. 
D)  floor. 
A)  stabilization. 
B)  ceiling. 
C)  support. 
D)  floor.

Question 9

What would be the LEAST likely result of a price floor in the market for airline travel?

Accepted Answer

A)  rapid replacement of old airliners with new aircraft 
B)  narrow seats and basic meals like peanuts or chips with a coffee or soda 
C)  special incentives like airline mileage clubs to attract customers 
D)  excellent engine maintenance 
A)  rapid replacement of old airliners with new aircraft 
B)  narrow seats and basic meals like peanuts or chips with a coffee or soda 
C)  special incentives like airline mileage clubs to attract customers 
D)  excellent engine maintenance

Question 10

The Civil Aeronautics Board regulated airline fares above the free-market rates,which led airlines to compete by offering fancy meals,wide seats,and frequent flights.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions 
Figure: Price Ceiling of Ps  
-(Figure: Price Ceiling of Ps)Refer to the figure.Suppose a price ceiling of Ps is imposed.The shaded area may likely represent all of the following EXCEPT:

Accepted Answer

A)  value of wasted time. 
B)  the amount that buyers bribe sellers. 
C)  the amount of corruption. 
D)  consumer surplus. 
A)  value of wasted time. 
B)  the amount that buyers bribe sellers. 
C)  the amount of corruption. 
D)  consumer surplus.

Question 12

Which statement(s)is TRUE? I.Rent controls prevent apartments from being allocated to people who value them the most.
II.With a system of rent controls,landlords are more likely to make needed repairs to their properties as a way of attracting renters.
III.Although inefficient,rent controls are the best way to help the poor afford housing.

Accepted Answer

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

Question 13

Price ceilings would create all of the following effects EXCEPT:

Accepted Answer

A)  shortages. 
B)  reductions in product quality. 
C)  a misallocation of resources. 
D)  maximum gains from trade. 
A)  shortages. 
B)  reductions in product quality. 
C)  a misallocation of resources. 
D)  maximum gains from trade.

Question 14

A price floor makes it illegal for firms to compete for more customers by lowering prices,causing firms to compete by offering customers higher quality.

Accepted Answer

A) True 
 B)False

Question 15

Which statement(s)is NOT true? I.The increase in the minimum wage in Puerto Rico in 1938 did not affect Puerto Rico's unemployment rate.
II.About 15% of all hourly workers in the United States earn the minimum wage.
III.Raising the minimum wage is an effective method to combat poverty.
IV.Raising the minimum wage decreases employment of low-skilled workers.

Accepted Answer

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

Question 16

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 17

To what does the Russian concept of blat refer?

Accepted Answer

A)  the barter system that developed in Russia as a result of the shortages of goods 
B)  the command economy system that was instituted in Russia 
C)  the act of standing in lines to buy goods 
D)  having connections that one can use to get favors 
A)  the barter system that developed in Russia as a result of the shortages of goods 
B)  the command economy system that was instituted in Russia 
C)  the act of standing in lines to buy goods 
D)  having connections that one can use to get favors

Question 18

Flexible prices ensure that:

Accepted Answer

A)  resources are allocated to their highest-valued uses. 
B)  suppliers will always profit from necessity goods. 
C)  self-interested individuals will not interfere with the efficiency of the market. 
D)  prices will always be minimized. 
A)  resources are allocated to their highest-valued uses. 
B)  suppliers will always profit from necessity goods. 
C)  self-interested individuals will not interfere with the efficiency of the market. 
D)  prices will always be minimized.

Question 19

Use the following to answer question 
Figure: Supply and Demand 3  
-When a price ceiling is binding,the goods that are on sale are allocated to buyers using a method:

Accepted Answer

A)  of random allocation. 
B)  whereby the highest bidder wins. 
C)  whereby the lowest bidder wins. 
D)  whereby buyers purchase lottery tickets to see who will be able to buy the product. 
A)  of random allocation. 
B)  whereby the highest bidder wins. 
C)  whereby the lowest bidder wins. 
D)  whereby buyers purchase lottery tickets to see who will be able to buy the product.

Question 20

Would you expect shortages due to rent controls to be more or less severe in the short run or in the long run? Does the elasticity of supply have a role to play?

Accepted Answer

Since apartments cannot easily be moved,

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

A binding price floor leads to a(n):

Use the following to answer question Figure: Supply and Demand 3 -When an effective price ceiling causes a shortage,some of the buyers who value the good the most may not be able to get the good.Why does this occur?

Why do many consumers and politicians advocate for price controls?

A price ceiling creates a when it is set .

Which statement is NOT an effect of a price ceiling?

Price controls cause resources to be misallocated by:

A legal maximum price at which a good can be sold is a price:

What would be the LEAST likely result of a price floor in the market for airline travel?

The Civil Aeronautics Board regulated airline fares above the free-market rates,which led airlines to compete by offering fancy meals,wide seats,and frequent flights.

Use the following to answer questions Figure: Price Ceiling of Ps -(Figure: Price Ceiling of Ps)Refer to the figure.Suppose a price ceiling of Ps is imposed.The shaded area may likely represent all of the following EXCEPT:

Price ceilings would create all of the following effects EXCEPT:

A price floor makes it illegal for firms to compete for more customers by lowering prices,causing firms to compete by offering customers higher quality.

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

To what does the Russian concept of blat refer?

Flexible prices ensure that:

Use the following to answer question Figure: Supply and Demand 3 -When a price ceiling is binding,the goods that are on sale are allocated to buyers using a method:

Would you expect shortages due to rent controls to be more or less severe in the short run or in the long run? Does the elasticity of supply have a role to play?

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

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

A binding price floor leads to a(n):

Use the following to answer question Figure: Supply and Demand 3 -When an effective price ceiling causes a shortage,some of the buyers who value the good the most may not be able to get the good.Why does this occur?

Why do many consumers and politicians advocate for price controls?

A price ceiling creates a ________ when it is set ________.

Which statement is NOT an effect of a price ceiling?

Price controls cause resources to be misallocated by:

A legal maximum price at which a good can be sold is a price:

What would be the LEAST likely result of a price floor in the market for airline travel?

The Civil Aeronautics Board regulated airline fares above the free-market rates,which led airlines to compete by offering fancy meals,wide seats,and frequent flights.

Use the following to answer questions Figure: Price Ceiling of Ps -(Figure: Price Ceiling of Ps)Refer to the figure.Suppose a price ceiling of Ps is imposed.The shaded area may likely represent all of the following EXCEPT:

Price ceilings would create all of the following effects EXCEPT:

A price floor makes it illegal for firms to compete for more customers by lowering prices,causing firms to compete by offering customers higher quality.

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

To what does the Russian concept of blat refer?

Flexible prices ensure that:

Use the following to answer question Figure: Supply and Demand 3 -When a price ceiling is binding,the goods that are on sale are allocated to buyers using a method:

Would you expect shortages due to rent controls to be more or less severe in the short run or in the long run? Does the elasticity of supply have a role to play?

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

A price ceiling creates a when it is set .