Question 1

Black markets may develop as a result of price controls because:

Accepted Answer

A) price controls increase efficiency. 
B) quantity demanded equals quantity supplied at the mandated price. 
C) price controls offer subsidies for market transactions. 
D) individuals can profit by illegal exchanges. 
A) price controls increase efficiency. 
B) quantity demanded equals quantity supplied at the mandated price. 
C) price controls offer subsidies for market transactions. 
D) individuals can profit by illegal exchanges.

Question 2

Quota limits that are less than the market equilibrium quantity cause:

Accepted Answer

A) the demand price to be above the supply price. 
B) the quantity demanded to be more than the quantity supplied. 
C) the quantity demanded to be less than the quantity supplied. 
D) the demand price to be equal to the supply price. 
A) the demand price to be above the supply price. 
B) the quantity demanded to be more than the quantity supplied. 
C) the quantity demanded to be less than the quantity supplied. 
D) the demand price to be equal to the supply price.

Question 3

Use the following to answer question:  
-(Figure: The Market for Hybrid Cars)Use Figure: The Market for Hybrid Cars.What area represents consumer surplus if there is a binding price floor at P1?

Accepted Answer

A) a 
B) a + b 
C) a + b + c 
D) a + b + d 
A) a 
B) a + b 
C) a + b + c 
D) a + b + d

Question 4

The quota rent is the:

Accepted Answer

A) difference between the demand price and the supply price at the quota limit. 
B) rent received by landlords who own rent-controlled apartments. 
C) opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota. 
D) minimum rent that the owner of a building must receive before he or she is willing to rent out the building. 
A) difference between the demand price and the supply price at the quota limit. 
B) rent received by landlords who own rent-controlled apartments. 
C) opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota. 
D) minimum rent that the owner of a building must receive before he or she is willing to rent out the building.

Question 5

Use the following to answer question:  
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1,000 pounds,the quota rent per pound is:

Accepted Answer

A) $15. 
B) $10. 
C) $5. 
D) $0. 
A) $15. 
B) $10. 
C) $5. 
D) $0.

Question 6

Suppose the U.S.government imposes a binding quota on the number of Japanese-made cars allowed into the United States.Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption,we would expect the price of Japanese cars to _____ and the price of U.S.-made cars to _____.

Accepted Answer

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

Question 7

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer question:  
-(Table: Market for Fried Twinkies)Use Table: Market for Fried Twinkies.If the government imposes a quota of 5,000 on the fried Twinkie market,the quota rent per fried Twinkie will be:

Accepted Answer

A) $1.20. 
B) $0.30. 
C) $1.50. 
D) $1.00. 
A) $1.20. 
B) $0.30. 
C) $1.50. 
D) $1.00.

Question 9

Use the following to answer question:  
-(Figure: Price Controls)Use Figure: Price Controls.The consumer surplus lost to a price floor at point b is equal to the area:

Accepted Answer

A) abe. 
B) egh. 
C) bcge. 
D) bcke. 
A) abe. 
B) egh. 
C) bcge. 
D) bcke.

Question 10

If a quota is set above the equilibrium quantity,there will be:

Accepted Answer

A) incentives for illegal activities. 
B) missed opportunities in the form of mutually beneficial transactions that don't occur. 
C) a supply price for the quantity transacted that exceeds the demand price of the quantity transacted. 
D) no immediate effect. 
A) incentives for illegal activities. 
B) missed opportunities in the form of mutually beneficial transactions that don't occur. 
C) a supply price for the quantity transacted that exceeds the demand price of the quantity transacted. 
D) no immediate effect.

Question 11

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50.The Saudi government's actions will:

Accepted Answer

A) improve efficiency since the low prices will force producers to find cheaper production methods. 
B) result in gasoline surpluses even in an oil-rich country. 
C) cause gasoline shortages even in an oil-rich country. 
D) necessarily improve equality between rich and poor since the poor can now afford gasoline. 
A) improve efficiency since the low prices will force producers to find cheaper production methods. 
B) result in gasoline surpluses even in an oil-rich country. 
C) cause gasoline shortages even in an oil-rich country. 
D) necessarily improve equality between rich and poor since the poor can now afford gasoline.

Question 12

An effective price ceiling will MOST likely result in:

Accepted Answer

A) an increase in the price. 
B) a decrease in deadweight loss. 
C) a decrease in producer surplus. 
D) no change in either producer or consumer surplus. 
A) an increase in the price. 
B) a decrease in deadweight loss. 
C) a decrease in producer surplus. 
D) no change in either producer or consumer surplus.

Question 13

Inefficient allocations of goods to consumers often result from:

Accepted Answer

A) price ceilings. 
B) producer surpluses. 
C) increases in income. 
D) market transactions. 
A) price ceilings. 
B) producer surpluses. 
C) increases in income. 
D) market transactions.

Question 14

Use the following to answer question:  
-(Figure: Market I)Use Figure: Market I.A price floor of $5 imposed on this market would:

Accepted Answer

A) result in a surplus of the good. 
B) have no immediate effect. 
C) increase production of this good. 
D) increase consumer spending on this good. 
A) result in a surplus of the good. 
B) have no immediate effect. 
C) increase production of this good. 
D) increase consumer spending on this good.

Question 15

The market for apples is in equilibrium at a price of $0.50 per pound.If the government imposes a price floor in the market at a price of $0.40 per pound:

Accepted Answer

A) quantity demanded will decrease. 
B) quantity supplied will increase. 
C) there will be a shortage of apples. 
D) the price floor will not affect the market price or output. 
A) quantity demanded will decrease. 
B) quantity supplied will increase. 
C) there will be a shortage of apples. 
D) the price floor will not affect the market price or output.

Question 16

Use the following to answer question:  
-(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent1:

Accepted Answer

A) rental apartments may be of inefficiently low quality. 
B) there will be an efficient allocation of rentals. 
C) some landlords may break the law by renting below the mandated price. 
D) new apartments will be constructed. 
A) rental apartments may be of inefficiently low quality. 
B) there will be an efficient allocation of rentals. 
C) some landlords may break the law by renting below the mandated price. 
D) new apartments will be constructed.

Black markets may develop as a result of price controls because:

Quota limits that are less than the market equilibrium quantity cause:

Use the following to answer question: -(Figure: The Market for Hybrid Cars)Use Figure: The Market for Hybrid Cars.What area represents consumer surplus if there is a binding price floor at P₁?

The quota rent is the:

Use the following to answer question: -(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1,000 pounds,the quota rent per pound is:

Suppose the U.S.government imposes a binding quota on the number of Japanese-made cars allowed into the United States.Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption,we would expect the price of Japanese cars to _ and the price of U.S.-made cars to _.

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Use the following to answer question: -(Table: Market for Fried Twinkies)Use Table: Market for Fried Twinkies.If the government imposes a quota of 5,000 on the fried Twinkie market,the quota rent per fried Twinkie will be:

Use the following to answer question: -(Figure: Price Controls)Use Figure: Price Controls.The consumer surplus lost to a price floor at point b is equal to the area:

If a quota is set above the equilibrium quantity,there will be:

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50.The Saudi government's actions will:

An effective price ceiling will MOST likely result in:

Inefficient allocations of goods to consumers often result from:

Use the following to answer question: -(Figure: Market I)Use Figure: Market I.A price floor of $5 imposed on this market would:

The market for apples is in equilibrium at a price of $0.50 per pound.If the government imposes a price floor in the market at a price of $0.40 per pound:

Use the following to answer question: -(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent₁:

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

Exam 5: Price Controls and Quotas: Meddling With Markets

Black markets may develop as a result of price controls because:

Quota limits that are less than the market equilibrium quantity cause:

Use the following to answer question: -(Figure: The Market for Hybrid Cars)Use Figure: The Market for Hybrid Cars.What area represents consumer surplus if there is a binding price floor at P1?

The quota rent is the:

Use the following to answer question: -(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1,000 pounds,the quota rent per pound is:

Suppose the U.S.government imposes a binding quota on the number of Japanese-made cars allowed into the United States.Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption,we would expect the price of Japanese cars to _____ and the price of U.S.-made cars to _____.

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Use the following to answer question: -(Table: Market for Fried Twinkies)Use Table: Market for Fried Twinkies.If the government imposes a quota of 5,000 on the fried Twinkie market,the quota rent per fried Twinkie will be:

Use the following to answer question: -(Figure: Price Controls)Use Figure: Price Controls.The consumer surplus lost to a price floor at point b is equal to the area:

If a quota is set above the equilibrium quantity,there will be:

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50.The Saudi government's actions will:

An effective price ceiling will MOST likely result in:

Inefficient allocations of goods to consumers often result from:

Use the following to answer question: -(Figure: Market I)Use Figure: Market I.A price floor of $5 imposed on this market would:

The market for apples is in equilibrium at a price of $0.50 per pound.If the government imposes a price floor in the market at a price of $0.40 per pound:

Use the following to answer question: -(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent1:

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: The Market for Hybrid Cars)Use Figure: The Market for Hybrid Cars.What area represents consumer surplus if there is a binding price floor at P₁?

Suppose the U.S.government imposes a binding quota on the number of Japanese-made cars allowed into the United States.Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption,we would expect the price of Japanese cars to _ and the price of U.S.-made cars to _.

Use the following to answer question: -(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent₁: