Question 1

Which of these cases would likely result from an increase in minimum wage?

Accepted Answer

A)  an increase in the price of hamburgers 
B)  an increase in unemployment among teenagers 
C)  incomes increase for those who keep minimum-wage jobs 
D)  All of the answers are correct. 
A)  an increase in the price of hamburgers 
B)  an increase in unemployment among teenagers 
C)  incomes increase for those who keep minimum-wage jobs 
D)  All of the answers are correct.

Question 2

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.As a result:

Accepted Answer

A)  The quantity supplied in the market is Qs. 
B)  Buyers' willingness to pay for the good is Pd. 
C)  The quantity demanded in the market is Qd. 
D)  All of the answers are correct. 
A)  The quantity supplied in the market is Qs. 
B)  Buyers' willingness to pay for the good is Pd. 
C)  The quantity demanded in the market is Qd. 
D)  All of the answers are correct.

Question 3

The Edict on Maximum Prices,established by the Roman Emperor Diocletian,created price ceilings on various jobs and goods in a failed effort to curb inflation.For example,legal pay for a farm laborer could be no more than 10.8¢ a day (payment set in modern currency).If the market rate of farm labor was 12¢ a day,which would be a plausible consequence of this law?

Accepted Answer

A)  farms would produce more food than they otherwise would 
B)  nothing unusual 
C)  a laborer would work less hard than he otherwise would 
D)  an increase in unemployment for farm hands 
A)  farms would produce more food than they otherwise would 
B)  nothing unusual 
C)  a laborer would work less hard than he otherwise would 
D)  an increase in unemployment for farm hands

Question 4

A price floor is:

Accepted Answer

A)  a maximum price allowed by law. 
B)  a minimum price allowed by law. 
C)  able to produce an efficient outcome. 
D)  a tool used to increase government revenues. 
A)  a maximum price allowed by law. 
B)  a minimum price allowed by law. 
C)  able to produce an efficient outcome. 
D)  a tool used to increase government revenues.

Question 5

Under rent control,tenants can expect:

Accepted Answer

A)  lower rent and higher-quality housing. 
B)  lower rent and lower-quality housing. 
C)  higher rent and a shortage of housing. 
D)  higher rent and a surplus of housing. 
A)  lower rent and higher-quality housing. 
B)  lower rent and lower-quality housing. 
C)  higher rent and a shortage of housing. 
D)  higher rent and a surplus of housing.

Question 6

Use the following to answer questions 
Figure: Price Controls  
-(Figure: Price Controls)Refer to the figure.Which price control would cause a shortage of 20 units of the good?

Accepted Answer

A)  a price ceiling of $10 
B)  a price floor of $10 
C)  a price ceiling of $6 
D)  a price floor of $6 
A)  a price ceiling of $10 
B)  a price floor of $10 
C)  a price ceiling of $6 
D)  a price floor of $6

Question 7

A shortage results when:

Accepted Answer

A)  a price floor is imposed. 
B)  a price ceiling is imposed. 
C)  there is excess supply without any price controls. 
D)  a price floor is imposed but it is not binding. 
A)  a price floor is imposed. 
B)  a price ceiling is imposed. 
C)  there is excess supply without any price controls. 
D)  a price floor is imposed but it is not binding.

Question 8

Raising the minimum wage is not an effective way to eliminate poverty because increases in the minimum wage:

Accepted Answer

A)  do not increase incomes. 
B)  create incentives for workers to exit the labor force. 
C)  create higher unemployment. 
D)  tend to simply increase birth rates among low-income households. 
A)  do not increase incomes. 
B)  create incentives for workers to exit the labor force. 
C)  create higher unemployment. 
D)  tend to simply increase birth rates among low-income households.

Question 9

An economy with permanent,universal price controls is in essence a:

Accepted Answer

A)  market economy. 
B)  social economy. 
C)  free economy. 
D)  command economy. 
A)  market economy. 
B)  social economy. 
C)  free economy. 
D)  command economy.

Question 10

If the equilibrium wage is $10 an hour and the government sets a minimum wage of $8,there will be a shortage of labor.

Accepted Answer

A) True 
 B)False

Question 11

Shortages in economic markets are inefficient because:

Accepted Answer

A)  time spent waiting in line is wasted time,and hence a wasted resource. 
B)  demanders are willing to pay more for the good,but suppliers are unwilling to supply any more of the good even at higher prices. 
C)  the willingness to pay by consumers is less than the controlled price. 
D)  they lead to increases in quality over and above what would be present in an uncontrolled market. 
A)  time spent waiting in line is wasted time,and hence a wasted resource. 
B)  demanders are willing to pay more for the good,but suppliers are unwilling to supply any more of the good even at higher prices. 
C)  the willingness to pay by consumers is less than the controlled price. 
D)  they lead to increases in quality over and above what would be present in an uncontrolled market.

Question 12

For a given demand curve,the high-valued uses are at the _____,and the low-valued uses are at the _____.

Accepted Answer

A)  top;bottom 
B)  bottom;top 
C)  top;top 
D)  bottom;bottom 
A)  top;bottom 
B)  bottom;top 
C)  top;top 
D)  bottom;bottom

Question 13

A free market maximizes the gains from trade,the sum of consumer and producer surplus,meeting all of the following conditions EXCEPT:

Accepted Answer

A)  all buyers who are willing to pay positive prices are able to receive goods from trade. 
B)  the supply of goods is bought by the buyers with the highest willingness to pay. 
C)  the supply of goods is sold by the sellers with the lowest costs. 
D)  there are no unexploited gains from trade between buyers and sellers. 
A)  all buyers who are willing to pay positive prices are able to receive goods from trade. 
B)  the supply of goods is bought by the buyers with the highest willingness to pay. 
C)  the supply of goods is sold by the sellers with the lowest costs. 
D)  there are no unexploited gains from trade between buyers and sellers.

Question 14

Which scenario shows how the Russian concept of blat works during a beef shortage?

Accepted Answer

A)  a politician acquires some steak through his friendship with the owner of the beef factory 
B)  a beef factory owner hoards some steak at his own house 
C)  a beef factory owner realizes that there is a surplus of plastic wrapping 
D)  more people than usual stand in line to try to buy steak 
A)  a politician acquires some steak through his friendship with the owner of the beef factory 
B)  a beef factory owner hoards some steak at his own house 
C)  a beef factory owner realizes that there is a surplus of plastic wrapping 
D)  more people than usual stand in line to try to buy steak

Question 15

In Puerto Rico in 1938,the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour.Workers in Puerto Rico were:

Accepted Answer

A)  happy with their raise. 
B)  hoping for a higher minimum wage. 
C)  devastated. 
D)  indifferent. 
A)  happy with their raise. 
B)  hoping for a higher minimum wage. 
C)  devastated. 
D)  indifferent.

Question 16

Specify the argument in favor of rent controls and the arguments against rent controls.Explain what other possible policies can create affordable housing.

Accepted Answer

Without rent controls some people may no

Question 17

When prices are not allowed to rise,there is no incentive for suppliers to ship resources to where they are needed most.

Accepted Answer

A) True 
 B)False

Question 18

Some economists compare the destructiveness of rent control to that of aerial bombardment because it causes:

Accepted Answer

A)  landlords to neglect their buildings,allowing them to deteriorate over time. 
B)  high search costs in apartment hunting. 
C)  there to be unexploited gains from trade. 
D)  apartments to go to renters who do not have the highest-valued use of the apartments. 
A)  landlords to neglect their buildings,allowing them to deteriorate over time. 
B)  high search costs in apartment hunting. 
C)  there to be unexploited gains from trade. 
D)  apartments to go to renters who do not have the highest-valued use of the apartments.

Question 19

Price ceilings set by the government:

Accepted Answer

A)  are desirable because they make markets more efficient. 
B)  can restore a market to equilibrium. 
C)  are generally believed to cause reductions in product quality. 
D)  are imposed to assist the poor without having adverse effects. 
A)  are desirable because they make markets more efficient. 
B)  can restore a market to equilibrium. 
C)  are generally believed to cause reductions in product quality. 
D)  are imposed to assist the poor without having adverse effects.

Question 20

Price ceilings:

Accepted Answer

A)  improve the allocation of resources because consumers with the greatest need for the product are more likely to afford the product. 
B)  misallocate resources because consumers who buy the product may not be the ones who value it the most. 
C)  misallocate resources because they allow consumers to compete against one another by offering sellers higher prices. 
D)  improve the allocation of resources because consumers are prevented from bidding up the price of products. 
A)  improve the allocation of resources because consumers with the greatest need for the product are more likely to afford the product. 
B)  misallocate resources because consumers who buy the product may not be the ones who value it the most. 
C)  misallocate resources because they allow consumers to compete against one another by offering sellers higher prices. 
D)  improve the allocation of resources because consumers are prevented from bidding up the price of products.

Which of these cases would likely result from an increase in minimum wage?

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.As a result:

A price floor is:

Under rent control,tenants can expect:

Use the following to answer questions Figure: Price Controls -(Figure: Price Controls)Refer to the figure.Which price control would cause a shortage of 20 units of the good?

A shortage results when:

Raising the minimum wage is not an effective way to eliminate poverty because increases in the minimum wage:

An economy with permanent,universal price controls is in essence a:

If the equilibrium wage is $10 an hour and the government sets a minimum wage of $8,there will be a shortage of labor.

Shortages in economic markets are inefficient because:

For a given demand curve,the high-valued uses are at the _,and the low-valued uses are at the _.

A free market maximizes the gains from trade,the sum of consumer and producer surplus,meeting all of the following conditions EXCEPT:

Which scenario shows how the Russian concept of blat works during a beef shortage?

In Puerto Rico in 1938,the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour.Workers in Puerto Rico were:

Specify the argument in favor of rent controls and the arguments against rent controls.Explain what other possible policies can create affordable housing.

When prices are not allowed to rise,there is no incentive for suppliers to ship resources to where they are needed most.

Some economists compare the destructiveness of rent control to that of aerial bombardment because it causes:

Price ceilings set by the government:

Price ceilings:

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

Which of these cases would likely result from an increase in minimum wage?

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.As a result:

A price floor is:

Under rent control,tenants can expect:

Use the following to answer questions Figure: Price Controls -(Figure: Price Controls)Refer to the figure.Which price control would cause a shortage of 20 units of the good?

A shortage results when:

Raising the minimum wage is not an effective way to eliminate poverty because increases in the minimum wage:

An economy with permanent,universal price controls is in essence a:

If the equilibrium wage is $10 an hour and the government sets a minimum wage of $8,there will be a shortage of labor.

Shortages in economic markets are inefficient because:

For a given demand curve,the high-valued uses are at the _____,and the low-valued uses are at the _____.

A free market maximizes the gains from trade,the sum of consumer and producer surplus,meeting all of the following conditions EXCEPT:

Which scenario shows how the Russian concept of blat works during a beef shortage?

In Puerto Rico in 1938,the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour.Workers in Puerto Rico were:

Specify the argument in favor of rent controls and the arguments against rent controls.Explain what other possible policies can create affordable housing.

When prices are not allowed to rise,there is no incentive for suppliers to ship resources to where they are needed most.

Some economists compare the destructiveness of rent control to that of aerial bombardment because it causes:

Price ceilings set by the government:

Price ceilings:

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

For a given demand curve,the high-valued uses are at the _,and the low-valued uses are at the _.