Question 1

Use the following to answer question:  
-(Figure: Supply and Demand)Use Figure: Supply and Demand.A price ceiling of P1 causes:

Accepted Answer

A) a shortage equal to the distance AB. 
B) a surplus equal to the distance AB. 
C) a shortage equal to the distance DE. 
D) no change to the market. 
A) a shortage equal to the distance AB. 
B) a surplus equal to the distance AB. 
C) a shortage equal to the distance DE. 
D) no change to the market. D

Question 2

An agricultural market price support policy establishes a binding price floor,which:

Accepted Answer

A) decreases the price paid by consumers. 
B) does not change the price paid by consumers. 
C) increases the price received by farmers. 
D) decreases the price received by farmers. 
A) decreases the price paid by consumers. 
B) does not change the price paid by consumers. 
C) increases the price received by farmers. 
D) decreases the price received by farmers. C

Question 3

The likely result of a binding price floor is a _____ of the good at a price _____ the equilibrium price.

Accepted Answer

A) surplus;above 
B) shortage;below 
C) surplus;below 
D) shortage;above 
A) surplus;above 
B) shortage;below 
C) surplus;below 
D) shortage;above A

Question 4

A minimum price that the government guarantees farmers will receive for a particular crop is a(n):

Accepted Answer

A) price ceiling. 
B) price floor (or price support). 
C) deficiency price. 
D) export subsidy. 
A) price ceiling. 
B) price floor (or price support). 
C) deficiency price. 
D) export subsidy.

Question 5

A student organization forms on your college campus to protest the high rent for apartments near campus.This organization is planning a meeting with the dean and the president of the college.Which choice BEST describes one policy the student organization might fight for?

Accepted Answer

A) a laissez faire policy 
B) a price floor 
C) a price ceiling 
D) a quantity control 
A) a laissez faire policy 
B) a price floor 
C) a price ceiling 
D) a quantity control

Question 6

(Table: Market for Butter)Use Table: Market for Butter.If the government imposes a price ceiling of $0.90 per pound of butter,the quantity of butter actually purchased will be _____ million pounds.

Accepted Answer

A) 10.5 
B) 9.0 
C) 1.5 
D) 10.0 
A) 10.5 
B) 9.0 
C) 1.5 
D) 10.0

Question 7

An effective price floor will lead to:

Accepted Answer

A) quantity demanded being greater than quantity supplied. 
B) an excess supply or a surplus. 
C) the need for government to produce more of the good. 
D) suppliers determining the amount of the good bought and sold in the market. 
A) quantity demanded being greater than quantity supplied. 
B) an excess supply or a surplus. 
C) the need for government to produce more of the good. 
D) suppliers determining the amount of the good bought and sold in the market.

Question 8

Price controls are always set below the market equilibrium price.

Accepted Answer

A) True 
 B)False

Question 9

Although they cost more than $200,000 when they were issued in the 1930s,the New York taxicab medallions are relatively inexpensive today,selling for around $3,000.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer question:  
-(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent0:

Accepted Answer

A) the shortage of rental units is the distance Q1 - Q3. 
B) some renters will be willing to pay a price as high as Rent4 for Q0 units. 
C) no one will have to pay a higher actual price than Rent0,nor will anyone be willing to do so. 
D) there will be a surplus of rental units. 
A) the shortage of rental units is the distance Q1 - Q3. 
B) some renters will be willing to pay a price as high as Rent4 for Q0 units. 
C) no one will have to pay a higher actual price than Rent0,nor will anyone be willing to do so. 
D) there will be a surplus of rental units.

Question 11

If government decides to control the amount of a good allowed to be transacted in a market,this will:

Accepted Answer

A) always result in an increase in efficiency in the market. 
B) increase incentives for market participants to engage in black market activities. 
C) result in the equilibrium quantity being produced if the quota is binding. 
D) lead to more of the good being produced. 
A) always result in an increase in efficiency in the market. 
B) increase incentives for market participants to engage in black market activities. 
C) result in the equilibrium quantity being produced if the quota is binding. 
D) lead to more of the good being produced.

Question 12

Suppose the state of Mississippi sets a price floor in the market for cotton.If the floor is set below the market-clearing price of cotton,the floor will cause a surplus of cotton.

Accepted Answer

A) True 
 B)False

Question 13

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Minnesota.

Accepted Answer

A) True 
 B)False

Question 14

Government intervention in the form of binding price floors or binding price ceilings will:

Accepted Answer

A) always enhance the efficiency of the market. 
B) result in either surpluses or shortages. 
C) move the market toward its equilibrium quantity more quickly. 
D) often be seen as necessary to decrease the activity of black markets. 
A) always enhance the efficiency of the market. 
B) result in either surpluses or shortages. 
C) move the market toward its equilibrium quantity more quickly. 
D) often be seen as necessary to decrease the activity of black markets.

Question 15

A price ceiling will not have an immediate effect if:

Accepted Answer

A) it is set above the equilibrium price. 
B) the equilibrium price is above the price ceiling. 
C) it is set below the equilibrium price. 
D) it creates a shortage. 
A) it is set above the equilibrium price. 
B) the equilibrium price is above the price ceiling. 
C) it is set below the equilibrium price. 
D) it creates a shortage.

Question 16

The quota rent is the same thing as deadweight loss.

Accepted Answer

A) True 
 B)False

Question 17

The difference between the demand price and the supply price at the quota limit is:

Accepted Answer

A) the quota rent. 
B) the rent received by landlords who own rent-controlled apartments. 
C) the opportunity cost of using or buying a good,subject to an import quota. 
D) usually large enough to cause a surplus. 
A) the quota rent. 
B) the rent received by landlords who own rent-controlled apartments. 
C) the opportunity cost of using or buying a good,subject to an import quota. 
D) usually large enough to cause a surplus.

Question 18

If the demand curve for clams is downward sloping,a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer question:  
-(Figure: Market I)Use Figure: Market I.If a price floor of $15 is imposed on this market and the government chooses to purchase the surplus,the government must buy _____ units of the good and spend a total amount of _____ on its purchase.

Accepted Answer

A) 5;$75 
B) 10;$150 
C) 9;$135 
D) 9;$81 
A) 5;$75 
B) 10;$150 
C) 9;$135 
D) 9;$81

Question 20

Use the following to answer question:  
-(Figure: Market I)Use Figure: Market I.A surplus of the good will result if the price is:

Accepted Answer

A) $15. 
B) $9. 
C) $6. 
D) $0. 
A) $15. 
B) $9. 
C) $6. 
D) $0.

Exam 5: Price Controls and Quotas: Meddling With Markets

Use the following to answer question: -(Figure: Supply and Demand)Use Figure: Supply and Demand.A price ceiling of P1 causes:

An agricultural market price support policy establishes a binding price floor,which:

The likely result of a binding price floor is a _____ of the good at a price _____ the equilibrium price.

A minimum price that the government guarantees farmers will receive for a particular crop is a(n):

A student organization forms on your college campus to protest the high rent for apartments near campus.This organization is planning a meeting with the dean and the president of the college.Which choice BEST describes one policy the student organization might fight for?

(Table: Market for Butter)Use Table: Market for Butter.If the government imposes a price ceiling of $0.90 per pound of butter,the quantity of butter actually purchased will be _____ million pounds.

An effective price floor will lead to:

Price controls are always set below the market equilibrium price.

Although they cost more than $200,000 when they were issued in the 1930s,the New York taxicab medallions are relatively inexpensive today,selling for around $3,000.

Use the following to answer question: -(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent0:

If government decides to control the amount of a good allowed to be transacted in a market,this will:

Suppose the state of Mississippi sets a price floor in the market for cotton.If the floor is set below the market-clearing price of cotton,the floor will cause a surplus of cotton.

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Minnesota.

Government intervention in the form of binding price floors or binding price ceilings will:

A price ceiling will not have an immediate effect if:

The quota rent is the same thing as deadweight loss.

The difference between the demand price and the supply price at the quota limit is:

If the demand curve for clams is downward sloping,a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

Use the following to answer question: -(Figure: Market I)Use Figure: Market I.If a price floor of $15 is imposed on this market and the government chooses to purchase the surplus,the government must buy _____ units of the good and spend a total amount of _____ on its purchase.

Use the following to answer question: -(Figure: Market I)Use Figure: Market I.A surplus of the good will result if the price is:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Use the following to answer question: -(Figure: Supply and Demand)Use Figure: Supply and Demand.A price ceiling of P₁causes:

The likely result of a binding price floor is a _ of the good at a price _ the equilibrium price.

Use the following to answer question: -(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent₀:

Use the following to answer question: -(Figure: Market I)Use Figure: Market I.If a price floor of $15 is imposed on this market and the government chooses to purchase the surplus,the government must buy _ units of the good and spend a total amount of _ on its purchase.