Question 1

The minimum wage is an example of a price floor in the labor market.

Accepted Answer

A) True 
 B)False

Question 2

Which statement is FALSE?

Accepted Answer

A)  A frost that destroys half the orange crop will create a surplus of oranges. 
B)  It is possible to have a shortage of a good even if its supplies are abundant. 
C)  Politicians often blame speculators and profiteers for rising prices rather than changes in supply and demand. 
D)  To eliminate a shortage,prices must rise. 
A)  A frost that destroys half the orange crop will create a surplus of oranges. 
B)  It is possible to have a shortage of a good even if its supplies are abundant. 
C)  Politicians often blame speculators and profiteers for rising prices rather than changes in supply and demand. 
D)  To eliminate a shortage,prices must rise.

Question 3

Universal price controls in the Soviet Union:

Accepted Answer

A)  led to widespread prosperity. 
B)  harmed powerful interests in the short run. 
C)  caused never-ending shortages and misallocations. 
D)  meant no one ever had to wait in line. 
A)  led to widespread prosperity. 
B)  harmed powerful interests in the short run. 
C)  caused never-ending shortages and misallocations. 
D)  meant no one ever had to wait in line.

Question 4

The presence of price floors in a market usually is an indication that:

Accepted Answer

A)  there is an insufficient quantity of a good or service being produced. 
B)  the forces of supply and demand are unable to establish an equilibrium price. 
C)  sellers of the good or service outnumber the buyers. 
D)  policymakers believe the price floor does not involve inequities. 
A)  there is an insufficient quantity of a good or service being produced. 
B)  the forces of supply and demand are unable to establish an equilibrium price. 
C)  sellers of the good or service outnumber the buyers. 
D)  policymakers believe the price floor does not involve inequities.

Question 5

Over time,housing shortages caused by rent control ______ because the supply of housing is ______ elastic in the long run.

Accepted Answer

A)  increase;less 
B)  increase;more 
C)  decrease;less 
D)  decrease;more 
A)  increase;less 
B)  increase;more 
C)  decrease;less 
D)  decrease;more

Question 6

Which is not an effect of a price floor?

Accepted Answer

A)  misallocation of resources 
B)  deregulation 
C)  surpluses 
D)  wasteful increases in quality 
A)  misallocation of resources 
B)  deregulation 
C)  surpluses 
D)  wasteful increases in quality

Question 7

Which is NOT a cost of binding price controls?

Accepted Answer

A)  misallocation 
B)  deadweight loss 
C)  search costs 
D)  equity costs 
A)  misallocation 
B)  deadweight loss 
C)  search costs 
D)  equity costs

Question 8

Use the following to answer questions 
Figure: Water Market  
-(Figure: Water Market)Refer to the figure: If a price floor in the diagram gets set at $8 a gallon,what is the deadweight loss?

Accepted Answer

A)  $30,000 
B)  $60,000 
C)  $240,000 
D)  $480,000 
A)  $30,000 
B)  $60,000 
C)  $240,000 
D)  $480,000

Question 9

Under a policy of rent control,the short-run shortage ______ the long-run shortage.

Accepted Answer

A)  is smaller than 
B)  is larger than 
C)  is equal to 
D)  overshadows 
A)  is smaller than 
B)  is larger than 
C)  is equal to 
D)  overshadows

Question 10

A price floor is a legal maximum on the price of a good or service.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  more than free market equilibrium price. 
B)  less than free market equilibrium price. 
C)  equal to free market equilibrium price. 
D)  unable to be compared with free market equilibrium price. 
A)  more than free market equilibrium price. 
B)  less than free market equilibrium price. 
C)  equal to free market equilibrium price. 
D)  unable to be compared with free market equilibrium price.

Question 12

A binding price ceiling 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 13

The Federal minimum wage causes unemployment MOSTLY among:

Accepted Answer

A)  middle-class workers. 
B)  young unskilled workers. 
C)  college graduates. 
D)  highly skilled workers. 
A)  middle-class workers. 
B)  young unskilled workers. 
C)  college graduates. 
D)  highly skilled workers.

Question 14

A price ceiling set below the equilibrium price always results in a shortage.

Accepted Answer

A) True 
 B)False

Question 15

After President Reagan repealed the price controls on gasoline:

Accepted Answer

A)  the supply of gasoline fell dramatically. 
B)  the market experienced a period of vast surpluses as a result of the lack of regulation. 
C)  prices rose a little at first,but supply quickly began to increase and prices fell. 
D)  prices rose dramatically as a result of the repealed legislation. 
A)  the supply of gasoline fell dramatically. 
B)  the market experienced a period of vast surpluses as a result of the lack of regulation. 
C)  prices rose a little at first,but supply quickly began to increase and prices fell. 
D)  prices rose dramatically as a result of the repealed legislation.

Question 16

In Ancient Egypt,the "Bronze Law" set maximum prices for wages,preventing them from rising above what rulers perceived as the minimum needed to survive.If this was 10¢ a day for a porter (someone who carries things short distances)and the market wage was 8¢ a day,which of the following would be a plausible consequence of this law?

Accepted Answer

A)  Porters would travel less quickly than they otherwise would. 
B)  Porters would transport items they normally would not. 
C)  Unemployment for porters would decrease. 
D)  Nothing unusual would happen. 
A)  Porters would travel less quickly than they otherwise would. 
B)  Porters would transport items they normally would not. 
C)  Unemployment for porters would decrease. 
D)  Nothing unusual would happen.

Question 17

Figure: Airline Industry   Refer to the figure.Suppose that airlines are regulated and prices are kept above the market level.According to the figure,the areas A and B represent,respectively,the:

Accepted Answer

A)  deadweight loss and quality waste. 
B)  deadweight loss and consumer surplus. 
C)  quality waste and deadweight loss. 
D)  quality waste and consumer surplus. 
A)  deadweight loss and quality waste. 
B)  deadweight loss and consumer surplus. 
C)  quality waste and deadweight loss. 
D)  quality waste and consumer surplus.

Question 18

Under a binding price ceiling,one expects the quality of a good to:

Accepted Answer

A)  rise. 
B)  remain the same. 
C)  fall. 
D)  change in an indeterminate direction. 
A)  rise. 
B)  remain the same. 
C)  fall. 
D)  change in an indeterminate direction.

Question 19

Use the following to answer questions 
Figure: Water Market  
-(Figure: Water Market)Refer to the figure.If a price floor in the diagram gets set at $8 a gallon,how big is the shortage or surplus?

Accepted Answer

A)  60,000 gallons in surplus 
B)  120,000 gallons in surplus 
C)  60,000 gallons in shortage 
D)  12,000 gallons in shortage 
A)  60,000 gallons in surplus 
B)  120,000 gallons in surplus 
C)  60,000 gallons in shortage 
D)  12,000 gallons in shortage

Question 20

When a price ceiling is in effect:

Accepted Answer

A)  some mutually beneficial trades between buyers and sellers do not occur. 
B)  no mutually beneficial trades between buyers and sellers occur. 
C)  all mutually beneficial trades between buyers and sellers occur. 
D)  it is impossible to say if any,some,or all beneficial trades between buyers or sellers fail to occur. 
A)  some mutually beneficial trades between buyers and sellers do not occur. 
B)  no mutually beneficial trades between buyers and sellers occur. 
C)  all mutually beneficial trades between buyers and sellers occur. 
D)  it is impossible to say if any,some,or all beneficial trades between buyers or sellers fail to occur.

The minimum wage is an example of a price floor in the labor market.

Which statement is FALSE?

Universal price controls in the Soviet Union:

The presence of price floors in a market usually is an indication that:

Over time,housing shortages caused by rent control because the supply of housing is elastic in the long run.

Which is not an effect of a price floor?

Which is NOT a cost of binding price controls?

Use the following to answer questions Figure: Water Market -(Figure: Water Market)Refer to the figure: If a price floor in the diagram gets set at $8 a gallon,what is the deadweight loss?

Under a policy of rent control,the short-run shortage ______ the long-run shortage.

A price floor is a legal maximum on the price of a good or service.

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

A binding price ceiling leads to a(n):

The Federal minimum wage causes unemployment MOSTLY among:

A price ceiling set below the equilibrium price always results in a shortage.

After President Reagan repealed the price controls on gasoline:

Figure: Airline Industry Refer to the figure.Suppose that airlines are regulated and prices are kept above the market level.According to the figure,the areas A and B represent,respectively,the:

Under a binding price ceiling,one expects the quality of a good to:

Use the following to answer questions Figure: Water Market -(Figure: Water Market)Refer to the figure.If a price floor in the diagram gets set at $8 a gallon,how big is the shortage or surplus?

When a price ceiling 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

The minimum wage is an example of a price floor in the labor market.

Which statement is FALSE?

Universal price controls in the Soviet Union:

The presence of price floors in a market usually is an indication that:

Over time,housing shortages caused by rent control ______ because the supply of housing is ______ elastic in the long run.

Which is not an effect of a price floor?

Which is NOT a cost of binding price controls?

Use the following to answer questions Figure: Water Market -(Figure: Water Market)Refer to the figure: If a price floor in the diagram gets set at $8 a gallon,what is the deadweight loss?

Under a policy of rent control,the short-run shortage ______ the long-run shortage.

A price floor is a legal maximum on the price of a good or service.

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

A binding price ceiling leads to a(n):

The Federal minimum wage causes unemployment MOSTLY among:

A price ceiling set below the equilibrium price always results in a shortage.

After President Reagan repealed the price controls on gasoline:

Figure: Airline Industry Refer to the figure.Suppose that airlines are regulated and prices are kept above the market level.According to the figure,the areas A and B represent,respectively,the:

Under a binding price ceiling,one expects the quality of a good to:

Use the following to answer questions Figure: Water Market -(Figure: Water Market)Refer to the figure.If a price floor in the diagram gets set at $8 a gallon,how big is the shortage or surplus?

When a price ceiling 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

Over time,housing shortages caused by rent control because the supply of housing is elastic in the long run.