Exam 5: Price Ceilings and Floors

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,loss due to random allocation instead of allocation to the highest-valued use is represented by area:

The blat economy described in the text results when price controls are:

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling,which means that price ceilings create lost gains from trade.

Which statement about price controls is most correct?

Rent controls are:

If a price floor is above the equilibrium price it will have no effect in the market.

Setting the maximum legal price above the market price will cause

Prices ceilings misallocate resources because with them resources are not necessarily allocated to their highest-valued use.

Once one accounts for time costs and bribes,it may be more expensive to make purchases at the government-controlled price than at the free-market price.

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

If price controls are imposed,gains from trade,including consumer and producer surplus,are likely to increase.

Which of these statements explains why price ceilings result in lost gains from trade?

Which statement about price ceilings is correct?

Use the following to answer questions Figure: Costs of Price Ceilings 2 -(Figure: Costs of Price Ceilings 2)Refer to the figure.What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

How can sellers increase profits when they face a price ceiling?

The price controls of the early 1970s caused:

Housing vouchers are a better option than rent controls when a government is attempting to make housing affordable for the poor.The reason is that the housing voucher entitles the tenant to:

A major hurricane damages many oil refineries,which increases the market price of gasoline from $3.50 to $5 per gallon.The Attorney General threatens legal action against gas station owners who raise prices above pre-hurricane levels,causing gas station owners to reluctantly sell gas for $3.50 per gallon.At $3.50 per gallon,shortages cause buyers to wait in line for 2 hours.If the average purchase is 15 gallons and buyers value their time at $20 an hour,is the Attorney General helping?

If quantity supplied equals 40 units and quantity demanded equals 50 units under a price control,then it is a:

Minimum wage laws are an example of price floors.