Question 1

In New York City there are more than 100,000 licensed taxicabs.

Accepted Answer

A) True 
 B)False

Question 2

Suppose Congress imposes a price ceiling of $5 per ATM transaction.If the average market-clearing price for an ATM transaction is $2,the price ceiling will not be binding in this instance.

Accepted Answer

A) True 
 B)False

Question 3

When the government imposes a quota on sales of a good or service,it usually licenses the right to sell a given quantity of the good.The market price of the license is equal to the:

Accepted Answer

A) demand price of the good. 
B) wedge that represents the difference between the demand price and the supply price. 
C) supply price of the good. 
D) equilibrium price of the good. 
A) demand price of the good. 
B) wedge that represents the difference between the demand price and the supply price. 
C) supply price of the good. 
D) equilibrium price of the good.

Question 4

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

Accepted Answer

A) True 
 B)False

Question 5

Which statement about the undesirable side effects of a quantity control is NOT correct?

Accepted Answer

A) Quantity controls do not lead to deadweight loss. 
B) Some mutually beneficial transactions do not occur because of quantity controls. 
C) Quantity controls provide incentives for illegal activities. 
D) Quantity controls cause a wedge between the demand price and supply price. 
A) Quantity controls do not lead to deadweight loss. 
B) Some mutually beneficial transactions do not occur because of quantity controls. 
C) Quantity controls provide incentives for illegal activities. 
D) Quantity controls cause a wedge between the demand price and supply price.

Question 6

A price floor or a price ceiling is an example of:

Accepted Answer

A) a quantity control. 
B) a price control. 
C) market equilibrium price. 
D) a quota. 
A) a quantity control. 
B) a price control. 
C) market equilibrium price. 
D) a quota.

Question 7

The market for salmon is in equilibrium.A binding price ceiling,a binding price floor,and a quota limit below the market equilibrium in this market would all cause:

Accepted Answer

A) deadweight loss arising from a quantity exchanged that is less than the equilibrium quantity. 
B) a supply price that exceeds a demand price. 
C) revenue collected by the government on each unit of salmon harvested. 
D) deadweight loss arising from a transfer of surplus from consumers to producers. 
A) deadweight loss arising from a quantity exchanged that is less than the equilibrium quantity. 
B) a supply price that exceeds a demand price. 
C) revenue collected by the government on each unit of salmon harvested. 
D) deadweight loss arising from a transfer of surplus from consumers to producers.

Question 8

Use the following to answer question:  
-(Figure: Supply and Demand)Use Figure: Supply and Demand.A price ceiling of P3 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.

Question 9

Use the following to answer question:  
-(Table: The Market for Taxi Rides)Use Table: The Market for Taxi Rides.If a government quota limit at 6 million rides is imposed,the quota rent accruing to the owner of a taxi medallion will be _____ per ride,but there will be a total missed opportunity (inefficiency)to consumers and producers of _____ million rides.

Accepted Answer

A) $1;1 
B) $2;2 
C) $3;3 
D) $4;4 
A) $1;1 
B) $2;2 
C) $3;3 
D) $4;4

Question 10

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 500 pounds,the quota rent per pound is:

Accepted Answer

A) $15. 
B) $10. 
C) $5. 
D) The quota rent cannot be determined from the information provided. 
A) $15. 
B) $10. 
C) $5. 
D) The quota rent cannot be determined from the information provided.

Question 11

In Europe,the minimum wage has led to:

Accepted Answer

A) lower unemployment,especially among young workers. 
B) a proliferation of large companies in Italy. 
C) widespread evasion of the minimum wage law in the black market for labor. 
D) European governments hiring the surplus of workers. 
A) lower unemployment,especially among young workers. 
B) a proliferation of large companies in Italy. 
C) widespread evasion of the minimum wage law in the black market for labor. 
D) European governments hiring the surplus of workers.

Question 12

When the minimum wage increases,which outcome is MOST likely?

Accepted Answer

A) Unemployment among skilled workers decreases. 
B) Fewer workers are willing to work off the books. 
C) Skilled workers will outnumber unskilled workers. 
D) Unemployment among unskilled workers increases. 
A) Unemployment among skilled workers decreases. 
B) Fewer workers are willing to work off the books. 
C) Skilled workers will outnumber unskilled workers. 
D) Unemployment among unskilled workers increases.

Question 13

Use the following to answer question:  
-(Figure: The Market for Butter)Use Figure: The Market for Butter.If a government price floor of $1.20 is imposed on this market,an inefficiency will result in the form of a _____ of _____ million pounds of butter.

Accepted Answer

A) surplus;4.5 
B) shortage;4.5 
C) surplus;1.5 
D) shortage;1.5 
A) surplus;4.5 
B) shortage;4.5 
C) surplus;1.5 
D) shortage;1.5

Question 14

Which example would be considered a black market transaction?

Accepted Answer

A) a tenant in a rent-controlled apartment subletting at a higher rent 
B) the purchase of an inferior radio at a department store 
C) waiting in line during the gasoline shortages of the 1970s 
D) the oil market 
A) a tenant in a rent-controlled apartment subletting at a higher rent 
B) the purchase of an inferior radio at a department store 
C) waiting in line during the gasoline shortages of the 1970s 
D) the oil market

Question 15

Use the following to answer question:  
-(Figure: The Market for Economics Textbooks)Use Figure: The Market for Economics Textbooks.Suppose the government believes textbooks are too expensive and it wants to make sure textbooks are affordable to more students.This type of price control is called a price _____,and one possible binding price control would be _____.

Accepted Answer

A) floor;$100 
B) floor;$40 
C) ceiling;$40 
D) ceiling;$100 
A) floor;$100 
B) floor;$40 
C) ceiling;$40 
D) ceiling;$100

Question 16

A minimum price set above the equilibrium price is a:

Accepted Answer

A) demand price. 
B) supply price. 
C) binding price floor. 
D) binding price ceiling. 
A) demand price. 
B) supply price. 
C) binding price floor. 
D) binding price ceiling.

Question 17

If the government imposes binding rent control:

Accepted Answer

A) rent will be set above the equilibrium price. 
B) it may result in some landlords leaving the business because they cannot cover costs. 
C) it will lead to rental units being higher in quality because landlords are guaranteed a high price. 
D) it will cause a surplus of housing. 
A) rent will be set above the equilibrium price. 
B) it may result in some landlords leaving the business because they cannot cover costs. 
C) it will lead to rental units being higher in quality because landlords are guaranteed a high price. 
D) it will cause a surplus of housing.

Question 18

Quotas,price ceilings,and price floors are all types of quantity controls that the government may impose.

Accepted Answer

A) True 
 B)False

Question 19

A maximum price legislated by the government is called:

Accepted Answer

A) a price support. 
B) a price floor. 
C) a price ceiling. 
D) the parity price. 
A) a price support. 
B) a price floor. 
C) a price ceiling. 
D) the parity price.

Question 20

To be binding,a price ceiling must be set at a price _____ the equilibrium price.

Accepted Answer

A) lower than 
B) higher than 
C) the same as 
D) Any price ceiling is binding. 
A) lower than 
B) higher than 
C) the same as 
D) Any price ceiling is binding.

In New York City there are more than 100,000 licensed taxicabs.

Suppose Congress imposes a price ceiling of $5 per ATM transaction.If the average market-clearing price for an ATM transaction is $2,the price ceiling will not be binding in this instance.

When the government imposes a quota on sales of a good or service,it usually licenses the right to sell a given quantity of the good.The market price of the license is equal to the:

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

Which statement about the undesirable side effects of a quantity control is NOT correct?

A price floor or a price ceiling is an example of:

The market for salmon is in equilibrium.A binding price ceiling,a binding price floor,and a quota limit below the market equilibrium in this market would all cause:

Use the following to answer question: -(Figure: Supply and Demand)Use Figure: Supply and Demand.A price ceiling of P₃ causes:

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 500 pounds,the quota rent per pound is:

In Europe,the minimum wage has led to:

When the minimum wage increases,which outcome is MOST likely?

Use the following to answer question: -(Figure: The Market for Butter)Use Figure: The Market for Butter.If a government price floor of $1.20 is imposed on this market,an inefficiency will result in the form of a _ of _ million pounds of butter.

Which example would be considered a black market transaction?

A minimum price set above the equilibrium price is a:

If the government imposes binding rent control:

Quotas,price ceilings,and price floors are all types of quantity controls that the government may impose.

A maximum price legislated by the government is called:

To be binding,a price ceiling must be set at a price _____ the equilibrium price.

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

In New York City there are more than 100,000 licensed taxicabs.

Suppose Congress imposes a price ceiling of $5 per ATM transaction.If the average market-clearing price for an ATM transaction is $2,the price ceiling will not be binding in this instance.

When the government imposes a quota on sales of a good or service,it usually licenses the right to sell a given quantity of the good.The market price of the license is equal to the:

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

Which statement about the undesirable side effects of a quantity control is NOT correct?

A price floor or a price ceiling is an example of:

The market for salmon is in equilibrium.A binding price ceiling,a binding price floor,and a quota limit below the market equilibrium in this market would all cause:

Use the following to answer question: -(Figure: Supply and Demand)Use Figure: Supply and Demand.A price ceiling of P3 causes:

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 500 pounds,the quota rent per pound is:

In Europe,the minimum wage has led to:

When the minimum wage increases,which outcome is MOST likely?

Use the following to answer question: -(Figure: The Market for Butter)Use Figure: The Market for Butter.If a government price floor of $1.20 is imposed on this market,an inefficiency will result in the form of a _____ of _____ million pounds of butter.

Which example would be considered a black market transaction?

A minimum price set above the equilibrium price is a:

If the government imposes binding rent control:

Quotas,price ceilings,and price floors are all types of quantity controls that the government may impose.

A maximum price legislated by the government is called:

To be binding,a price ceiling must be set at a price _____ the equilibrium price.

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 P₃ causes:

Use the following to answer question: -(Figure: The Market for Butter)Use Figure: The Market for Butter.If a government price floor of $1.20 is imposed on this market,an inefficiency will result in the form of a _ of _ million pounds of butter.