Question 1

A rent ceiling

Accepted Answer

A)  increases the quantity of rental units supplied. 
B)  cannot change the market price. 
C)  set above equilibrium price has no effect. 
D)  generally aims at insuring that landlords receive a higher rent than would otherwise be the case.

Question 2

-Which of the following outcomes is NOT a result of a tax imposed on sellers of gasoline?

Accepted Answer

A)  Supply decreases, a deadweight loss is created, and the price rises. 
B)  The market becomes less efficient and the government collects the tax revenue. 
C)  Demand does not change, the price rises, and consumer surplus decreases. 
D)  Demand decreases, the market becomes more efficient, and the price rises.

Question 3

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

Accepted Answer

A)  a shortage of 500,000 apartments. 
B)  a shortage of 400,000 apartments. 
C)  a shortage of 200,000 apartments. 
D)  no shortage nor a surplus of apartments.

Question 4

-The above figure shows the apartment market in Big City. A rent ceiling of $1100 would

Accepted Answer

A)  not create a black market. 
B)  create a shortage of apartments. 
C)  decrease search activity. 
D)  shift the supply curve rightward.

Question 5

-The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours of students' labor are unemployed?

Accepted Answer

A)  12,000 hours 
B)  9,000 hours 
C)  6,000 hours 
D)  0 hours

Question 6

-The table above shows the demand and supply schedules for the market for coffee in Roastville. A tax on coffee of 75 cents per pound is proposed and the local government asks you to examine the effects of the tax.
a) Draw the demand and supply curves. If there is no tax on coffee, what is the price and how many pounds are sold?
b) With the tax, what is the price that consumers pay? What is the price that sellers receive? How many pounds of coffee are sold?
c) What is the government's total tax revenue? How much of the 75¢ per pound tax is paid by buyers? How much is paid by sellers?
d) If there are no external costs and benefits, what is the efficient level of coffee production?
e) If the tax is imposed, will the level of production be efficient? Why or why not?

Accepted Answer

The answer of 
-The table above shows the demand and...

Question 7

-The above figure shows the apartment rental market in Bigtown. If the Bigtown Housing Authority imposes a rent ceiling of $500 per month, the rent ceiling will help

Accepted Answer

A)  all renters. 
B)  some renters and hurt other renters. 
C)  all landlords. 
D)  some landlords and hurt other landlords.

Question 8

-The figure above shows the housing market in the city of Appleville. A rent ceiling of $650 per month is imposed. With the rent ceiling, what is the maximum black market rent in Appleville?

Accepted Answer

A)  $650 per month 
B)  $700 per month 
C)  $750 per month 
D)  $800 per month

Question 9

The Volumetric Ethanol Excise Tax Credit (VEETC) is a tax credit for registered ethanol-gasoline blenders. Qualified blenders receive $0.51 for each gallon of pure ethanol they blend into gasoline. VEETC is an example of a

Accepted Answer

A)  subsidy. 
B)  price floor. 
C)  price ceiling. 
D)  quota.

Question 10

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The loss of producer surplus as a result of the price ceiling is

Accepted Answer

A)  $50,000 per month. 
B)  $250,000 per month. 
C)  $500,000 per month. 
D)  more than $500,000 per month.

Question 11

-In the above figure, at what minimum wage is the unemployment level equal to 200 million hours?

Accepted Answer

A)  $2 per hour 
B)  $4 per hour 
C)  $6 per hour 
D)  $8 per hour

Question 12

-Of the $3 per pizza tax illustrated in the above figure, the

Accepted Answer

A)  consumers pay $2 of the $3 per pizza tax. 
B)  sellers pay $1 of the $3 per pizza tax. 
C)  government collects $120 thousand in revenue from the pizza tax. 
D)  All of the above answers are correct.

Question 13

In the market for books, initially there are no taxes on books. Books are normal goods. The government introduces a tax of $4 a book and, at the same time, people's income fall by $4,000 a year. Following these two changes, the equilibrium quantity of books

Accepted Answer

A)  decreases. 
B)  increases. 
C)  remains unchanged. 
D)  either increases or decreases. We cannot say which.

Question 14

-Suppose the government imposes a $1 tax on frisbees, and the price of a frisbee paid by demanders rises by $1.

Accepted Answer

A)  The price rise is consistent with a perfectly elastic supply for frisbees. 
B)  The price rise is consistent with a perfectly elastic demand for frisbees. 
C)  The price rise is consistent with a downward-sloping supply curve for frisbees. 
D)  The price could never rise this much, so this situation cannot happen.

Question 15

Rent controls and the minimum wage are both examples of price ceilings.

Accepted Answer

A) True 
 B)False

Question 16

With rent controls, which of the following is most likely to occur?

Accepted Answer

A)  decreased search activity 
B)  black market activity 
C)  a building boom 
D)  a housing surplus

Question 17

The Volumetric Ethanol Excise Tax Credit (VEETC) is a tax credit (which acts like a subsidy) for registered ethanol-gasoline blenders. Qualified blenders receive $0.51 for each gallon of pure ethanol they blend into gasoline. What statement is TRUE?

Accepted Answer

A)  With a subsidy, the price paid by consumers will be lower than without a subsidy. 
B)  Without a subsidy, the quantity produced by blenders will be greater than the quantity demanded. 
C)  With a subsidy, the equilibrium quantity produced will be lower than without a subsidy. 
D)  With a subsidy, production will be efficient.

Question 18

-The figure above illustrates a rental housing market in which there is a rent ceiling of $400 a month. The rent ceiling is strictly enforced. The number of apartments rented is

Accepted Answer

A)  less than 2 thousand. 
B)  2 thousand. 
C)  3 thousand. 
D)  4 thousand.

Question 19

The minimum wage in 2008 was $6.55 cents until July 2008 when it was raised to $7.25. If the minimum wage in June was below the equilibrium wage and the increased wage in July was above the equilibrium wage, then

Accepted Answer

A)  firms' producer surplus was greater in June than in July. 
B)  unemployment was unaffected by the increase. 
C)  the deadweight loss was greater in June than in July. 
D)  employment of low-skilled workers increased in July.

Question 20

A price ceiling ________.

Accepted Answer

A)  makes it illegal to charge a higher price than the specified price 
B)  is more effective when it is higher 
C)  is necessary to maintain market equilibrium 
D)  occurs in housing markets only

Exam 6: Government Actions in Markets