Question 1

President Richard Nixon froze all prices and wages in 1971,which led to shortages of goods throughout the economy.

Accepted Answer

A) True 
 B)False

Question 2

Price controls cause resources to be ________ not just geographically,but also across different ________ of those resources.

Accepted Answer

A)  overutilized;types 
B)  properly allocated;demands 
C)  cheaper;uses 
D)  misallocated;uses 
A)  overutilized;types 
B)  properly allocated;demands 
C)  cheaper;uses 
D)  misallocated;uses

Question 3

Businesses may respond to price ceilings by closing down,reducing product quality,and by accepting bribes to sell their product.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions 
Figure: Government Price Controls  
-(Figure: Government Price Controls)Refer to the figure.If the government sets the price ceiling at $31,there will be:

Accepted Answer

A)  a shortage of 15 units. 
B)  a surplus of 15 units. 
C)  a supply of 20 units. 
D)  no effect on the market. 
A)  a shortage of 15 units. 
B)  a surplus of 15 units. 
C)  a supply of 20 units. 
D)  no effect on the market.

Question 5

If price controls are so harmful,why would a country ever impose them?

Accepted Answer

A)  No one really knows. 
B)  Price controls are usually thought to be beneficial. 
C)  Politicians have strong incentives to respond to public opinion with price controls when prices increase sharply. 
D)  People usually see the consequences of price controls but think they will be a good policy. 
A)  No one really knows. 
B)  Price controls are usually thought to be beneficial. 
C)  Politicians have strong incentives to respond to public opinion with price controls when prices increase sharply. 
D)  People usually see the consequences of price controls but think they will be a good policy.

Question 6

Price floors make it illegal to compete for more customers by lowering prices,so firms compete by offering customers:

Accepted Answer

A)  various options. 
B)  more quantity. 
C)  more discount. 
D)  higher quality. 
A)  various options. 
B)  more quantity. 
C)  more discount. 
D)  higher quality.

Question 7

If price ceilings do not allow prices to rise,then demanders will be unable to signal their needs to suppliers.

Accepted Answer

A) True 
 B)False

Question 8

Price controls such as those instituted by President Richard Nixon in 1971 led to severe shortages in many markets across the United States.

Accepted Answer

A) True 
 B)False

Question 9

Which statement is TRUE in a market with a price ceiling?

Accepted Answer

A)  Buyers and sellers experience unexploited gains from trade. 
B)  Resources are allocated to their most efficient uses. 
C)  The supply of goods is sold by the sellers with the lowest costs. 
D)  The supply of goods is bought by the buyers with the highest willingness to pay. 
A)  Buyers and sellers experience unexploited gains from trade. 
B)  Resources are allocated to their most efficient uses. 
C)  The supply of goods is sold by the sellers with the lowest costs. 
D)  The supply of goods is bought by the buyers with the highest willingness to pay.

Question 10

Which would NOT happen as the result of a price floor?

Accepted Answer

A)  a surplus of the good 
B)  lost gains from trade 
C)  misallocation of resources 
D)  decreases in product quality 
A)  a surplus of the good 
B)  lost gains from trade 
C)  misallocation of resources 
D)  decreases in product quality

Question 11

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

Accepted Answer

A)  it controlled price,but not entry into the airline market. 
B)  it controlled both price and entry into the airline market. 
C)  it listened to the requests of suppliers during this time at the expense of consumers. 
D)  of declining production costs. 
A)  it controlled price,but not entry into the airline market. 
B)  it controlled both price and entry into the airline market. 
C)  it listened to the requests of suppliers during this time at the expense of consumers. 
D)  of declining production costs.

Question 12

The chronic shortages of goods in the Soviet Union were:

Accepted Answer

A)  caused by the CIA's manipulation of the Soviet currency. 
B)  limited to luxury items,like yachts and airplanes. 
C)  the result of too much defense spending that hoarded resources away from the production of consumer goods. 
D)  beneficial to the party elite who traded scarce goods for favors and other scarce goods. 
A)  caused by the CIA's manipulation of the Soviet currency. 
B)  limited to luxury items,like yachts and airplanes. 
C)  the result of too much defense spending that hoarded resources away from the production of consumer goods. 
D)  beneficial to the party elite who traded scarce goods for favors and other scarce goods.

Question 13

If firms are unable to lower prices because of a legally mandated price floor,then:

Accepted Answer

A)  firms are better off (higher profits)at the expense of consumers. 
B)  firms will often compete by offering higher-quality goods than consumers are willing to pay for. 
C)  consumers will decrease their demand due to the high prices. 
D)  quantity supplied will be less than quantity demanded. 
A)  firms are better off (higher profits)at the expense of consumers. 
B)  firms will often compete by offering higher-quality goods than consumers are willing to pay for. 
C)  consumers will decrease their demand due to the high prices. 
D)  quantity supplied will be less than quantity demanded.

Question 14

Price ceilings do not have much effect:

Accepted Answer

A)  in times of high inflation. 
B)  ever. 
C)  when market prices are at or below the ceiling. 
D)  in nonmarket economies. 
A)  in times of high inflation. 
B)  ever. 
C)  when market prices are at or below the ceiling. 
D)  in nonmarket economies.

Question 15

Which statement(s)is TRUE? I.Regulations that limit the rate of increase in rents are equally as inefficient as rent controls.
II.Rent regulations reduce the incentive for landlords to cut back on maintenance.
III.Regulations that limit the rate of increase in rents allow the price of rental housing to respond to market forces.

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 16

If affordable housing is a concern,then a better policy than rent controls may be for the government to provide:

Accepted Answer

A)  subsidized housing. 
B)  additional jobs. 
C)  housing vouchers. 
D)  mortgage discounts. 
A)  subsidized housing. 
B)  additional jobs. 
C)  housing vouchers. 
D)  mortgage discounts.

Question 17

Regulation of airline fares under the Civil Aeronautics Board:

Accepted Answer

A)  meant the government prevented the entry of new competitors to maintain high ticket prices. 
B)  led to greater innovation in the airline industry at the cost of higher ticket prices. 
C)  created incentives for optimal resource allocation. 
D)  made it possible for lower-income Americans to afford air travel for the first time. 
A)  meant the government prevented the entry of new competitors to maintain high ticket prices. 
B)  led to greater innovation in the airline industry at the cost of higher ticket prices. 
C)  created incentives for optimal resource allocation. 
D)  made it possible for lower-income Americans to afford air travel for the first time.

Question 18

A minimum wage mostly creates unemployment among older workers.

Accepted Answer

A) True 
 B)False

Question 19

When the maximum legal price is set below the market price then: I.a price floor is in effect.
II.a shortage will develop.
III.there will be lost gains from trade.
IV.there will be no impact on the quantity demanded or supplied.

Accepted Answer

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

Question 20

Which statement would be the least likely result of rent controls?

Accepted Answer

A)  Landlords are more selective with respect to the people they rent apartments to. 
B)  Landlords provide less maintenance on the apartments. 
C)  More new apartments are available for rent. 
D)  More people look for apartments for rent than the number of apartments available. 
A)  Landlords are more selective with respect to the people they rent apartments to. 
B)  Landlords provide less maintenance on the apartments. 
C)  More new apartments are available for rent. 
D)  More people look for apartments for rent than the number of apartments available.

President Richard Nixon froze all prices and wages in 1971,which led to shortages of goods throughout the economy.

Price controls cause resources to be not just geographically,but also across different of those resources.

Businesses may respond to price ceilings by closing down,reducing product quality,and by accepting bribes to sell their product.

Use the following to answer questions Figure: Government Price Controls -(Figure: Government Price Controls)Refer to the figure.If the government sets the price ceiling at $31,there will be:

If price controls are so harmful,why would a country ever impose them?

Price floors make it illegal to compete for more customers by lowering prices,so firms compete by offering customers:

If price ceilings do not allow prices to rise,then demanders will be unable to signal their needs to suppliers.

Price controls such as those instituted by President Richard Nixon in 1971 led to severe shortages in many markets across the United States.

Which statement is TRUE in a market with a price ceiling?

Which would NOT happen as the result of a price floor?

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

The chronic shortages of goods in the Soviet Union were:

If firms are unable to lower prices because of a legally mandated price floor,then:

Price ceilings do not have much effect:

If affordable housing is a concern,then a better policy than rent controls may be for the government to provide:

Regulation of airline fares under the Civil Aeronautics Board:

A minimum wage mostly creates unemployment among older workers.

When the maximum legal price is set below the market price then: I.a price floor is in effect. II.a shortage will develop. III.there will be lost gains from trade. IV.there will be no impact on the quantity demanded or supplied.

Which statement would be the least likely result of rent controls?

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

President Richard Nixon froze all prices and wages in 1971,which led to shortages of goods throughout the economy.

Price controls cause resources to be ________ not just geographically,but also across different ________ of those resources.

Businesses may respond to price ceilings by closing down,reducing product quality,and by accepting bribes to sell their product.

Use the following to answer questions Figure: Government Price Controls -(Figure: Government Price Controls)Refer to the figure.If the government sets the price ceiling at $31,there will be:

If price controls are so harmful,why would a country ever impose them?

Price floors make it illegal to compete for more customers by lowering prices,so firms compete by offering customers:

If price ceilings do not allow prices to rise,then demanders will be unable to signal their needs to suppliers.

Price controls such as those instituted by President Richard Nixon in 1971 led to severe shortages in many markets across the United States.

Which statement is TRUE in a market with a price ceiling?

Which would NOT happen as the result of a price floor?

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

The chronic shortages of goods in the Soviet Union were:

If firms are unable to lower prices because of a legally mandated price floor,then:

Price ceilings do not have much effect:

If affordable housing is a concern,then a better policy than rent controls may be for the government to provide:

Regulation of airline fares under the Civil Aeronautics Board:

A minimum wage mostly creates unemployment among older workers.

When the maximum legal price is set below the market price then: I.a price floor is in effect. II.a shortage will develop. III.there will be lost gains from trade. IV.there will be no impact on the quantity demanded or supplied.

Which statement would be the least likely result of rent controls?

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

Price controls cause resources to be not just geographically,but also across different of those resources.