Question 1

An example of a binding price ceiling is ________ the equilibrium price.

Accepted Answer

A)  a minimum wage law that is set above 
B)  rent control that is set above 
C)  a black market that sets the price below 
D)  a minimum wage law that is set below 
E)  rent control that is set below 
A)  a minimum wage law that is set above 
B)  rent control that is set above 
C)  a black market that sets the price below 
D)  a minimum wage law that is set below 
E)  rent control that is set below E

Question 2

What is the incentive to create a black market when a binding price ceiling exists?

Accepted Answer

A)  A black market emerges because sellers have a surplus that they need to sell. 
B)  A black market emerges because sellers want a market where they can sell lower-quality products. 
C)  A black market emerges because sellers want a market where they can sell higher-quality products at higher prices. 
D)  A black market does not emerge because sellers are content to sell at the lower price. 
E)  A black market emerges because buyers who have a low opportunity cost are seeking out the product. 
A)  A black market emerges because sellers have a surplus that they need to sell. 
B)  A black market emerges because sellers want a market where they can sell lower-quality products. 
C)  A black market emerges because sellers want a market where they can sell higher-quality products at higher prices. 
D)  A black market does not emerge because sellers are content to sell at the lower price. 
E)  A black market emerges because buyers who have a low opportunity cost are seeking out the product. C

Question 3

Which is a correct statement about a rent control law?

Accepted Answer

A)  A rent control law is a price floor law that makes apartments cheaper to rent but discourages property owners from renting out apartments. 
B)  A rent control law encourages property owners to convert offices and condos into apartments. 
C)  A rent control law reduces housing shortages. 
D)  A rent control law encourages landlords to rent out apartments. 
E)  A rent control law is a price ceiling law that makes apartments cheaper to rent but discourages property owners from renting out apartments. 
A)  A rent control law is a price floor law that makes apartments cheaper to rent but discourages property owners from renting out apartments. 
B)  A rent control law encourages property owners to convert offices and condos into apartments. 
C)  A rent control law reduces housing shortages. 
D)  A rent control law encourages landlords to rent out apartments. 
E)  A rent control law is a price ceiling law that makes apartments cheaper to rent but discourages property owners from renting out apartments. E

Question 4

Jamie,an economics student,was just named Miss Florida,based in part on her answer to the question of why price gouging laws should be relaxed in that state.Jamie won because she gave which of the following answers?

Accepted Answer

A)  They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster. 
B)  They cause consumers to consume more of certain products during a time of disaster. 
C)  They cause producers to overproduce products during a time of disaster. 
D)  They act as a binding price floor in a time of disaster. 
E)  They cause a surplus in the product during a time of disaster. 
A)  They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster. 
B)  They cause consumers to consume more of certain products during a time of disaster. 
C)  They cause producers to overproduce products during a time of disaster. 
D)  They act as a binding price floor in a time of disaster. 
E)  They cause a surplus in the product during a time of disaster.

Question 5

What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is $1.75?

Accepted Answer

A)  100,000 
B)  86,000 
C)  75,000 
D)  40,000 
E)  0 (zero) 
A)  100,000 
B)  86,000 
C)  75,000 
D)  40,000 
E)  0 (zero)

Question 6

Use the following table to answer the following questions.
  
-If a minimum wage is set at $5.50,what is the amount of disequilibrium in the labor market?

Accepted Answer

A)  There would be a labor shortage of 25,515,000. 
B)  There would be a labor surplus of 25,515,000. 
C)  There would be neither a shortage nor a surplus. 
D)  A labor surplus of 25,515,000 would be eliminated because individuals would decide to work in the illegal black market. 
E)  A labor surplus of 25,515,000 would increase as individuals find work in the illegal black market. 
A)  There would be a labor shortage of 25,515,000. 
B)  There would be a labor surplus of 25,515,000. 
C)  There would be neither a shortage nor a surplus. 
D)  A labor surplus of 25,515,000 would be eliminated because individuals would decide to work in the illegal black market. 
E)  A labor surplus of 25,515,000 would increase as individuals find work in the illegal black market.

Question 7

Why is raising the minimum wage generally ineffective?

Accepted Answer

A)  Most employers purchase labor on the black market,where the binding price floor is not present. 
B)  The minimum wage is an amount suggested by the government,and employers are under no obligation to pay their employees the suggested basic wage. 
C)  The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding. 
D)  Employees are often unconcerned with their wages and care more about the benefits that come with the job. 
E)  Most employees who hold low-wage jobs work in the black market,where the binding price floor doesn't exist. 
A)  Most employers purchase labor on the black market,where the binding price floor is not present. 
B)  The minimum wage is an amount suggested by the government,and employers are under no obligation to pay their employees the suggested basic wage. 
C)  The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding. 
D)  Employees are often unconcerned with their wages and care more about the benefits that come with the job. 
E)  Most employees who hold low-wage jobs work in the black market,where the binding price floor doesn't exist.

Question 8

What will happen in a market where a binding price ceiling is removed?

Accepted Answer

A)  There will be downward pressure on the price in the legal market. 
B)  The products sold will improve in quality and become more plentiful. 
C)  Sellers will face a reduced incentive to sell the product. 
D)  Buyers will find the good more difficult to obtain in the legal market. 
E)  There will be increased pressure to buy and sell the good on the black market. 
A)  There will be downward pressure on the price in the legal market. 
B)  The products sold will improve in quality and become more plentiful. 
C)  Sellers will face a reduced incentive to sell the product. 
D)  Buyers will find the good more difficult to obtain in the legal market. 
E)  There will be increased pressure to buy and sell the good on the black market.

Question 9

A binding minimum wage will increase the income of

Accepted Answer

A)  all workers. 
B)  potential workers seeking employment. 
C)  only those workers in jobs that would normally pay less than minimum wage. 
D)  only those workers in jobs that would normally pay more than minimum wage. 
E)  no workers. 
A)  all workers. 
B)  potential workers seeking employment. 
C)  only those workers in jobs that would normally pay less than minimum wage. 
D)  only those workers in jobs that would normally pay more than minimum wage. 
E)  no workers.

Question 10

If a price ceiling or price floor existed where one lives,would he or she be willing to purchase products on the black market? What would he or she identify as a consequence to engaging in transactions on the black market over the short run and the long run?

Accepted Answer

Students' answers will vary.If a student

Question 11

What reasons are given by government to enact price controls?

Accepted Answer

As the beginning of the chapter narrates

Question 12

If a good is subject to a binding price ceiling and one purchases it on the black market,what can one expect to happen to the availability of the good over time?

Accepted Answer

As we learned in the chapter,s

Question 13

Why is it often difficult to remove a binding price floor after it exists?

Accepted Answer

A)  in general,because consumers benefit from the lower prices and would lobby their elected officials to keep the price control 
B)  in general,because consumers benefit from higher quality products and would lobby their elected officials to keep the price control 
C)  in general,because consumers benefit from larger products and would lobby their elected officials to keep the price control 
D)  in general,because sellers benefit from higher prices and would lobby their elected officials to keep the price control 
E)  in general,because it has little effect on the market price and people forget about it 
A)  in general,because consumers benefit from the lower prices and would lobby their elected officials to keep the price control 
B)  in general,because consumers benefit from higher quality products and would lobby their elected officials to keep the price control 
C)  in general,because consumers benefit from larger products and would lobby their elected officials to keep the price control 
D)  in general,because sellers benefit from higher prices and would lobby their elected officials to keep the price control 
E)  in general,because it has little effect on the market price and people forget about it

Question 14

Which of the following is a correct statement?

Accepted Answer

A)  Rent control and the minimum wage are both illustrations of price floors. 
B)  Rent control is an illustration of a price floor and the minimum wage is an illustration of a price ceiling. 
C)  Rent control and the minimum wage are neither illustrations of price floors nor price ceilings. 
D)  Rent control is an illustration of a price ceiling and the minimum wage is an illustration of a price floor. 
E)  Rent control and the minimum wage are both illustrations of price ceilings. 
A)  Rent control and the minimum wage are both illustrations of price floors. 
B)  Rent control is an illustration of a price floor and the minimum wage is an illustration of a price ceiling. 
C)  Rent control and the minimum wage are neither illustrations of price floors nor price ceilings. 
D)  Rent control is an illustration of a price ceiling and the minimum wage is an illustration of a price floor. 
E)  Rent control and the minimum wage are both illustrations of price ceilings.

Question 15

Do all buyers benefit from a binding price ceiling?

Accepted Answer

A)  Yes.A binding price ceiling benefits all buyers because it allows them to obtain the good in the legal market. 
B)  No.A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal market. 
C)  No.A binding price ceiling benefits no buyers because sellers are unwilling to sell any of their products. 
D)  No.A binding price ceiling benefits only some buyers because,although the price is initially lower,it eventually increases to the equilibrium price. 
E)  No.A binding price ceiling benefits no buyers because they are unwilling to buy any of the products at a price higher than the equilibrium. 
A)  Yes.A binding price ceiling benefits all buyers because it allows them to obtain the good in the legal market. 
B)  No.A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal market. 
C)  No.A binding price ceiling benefits no buyers because sellers are unwilling to sell any of their products. 
D)  No.A binding price ceiling benefits only some buyers because,although the price is initially lower,it eventually increases to the equilibrium price. 
E)  No.A binding price ceiling benefits no buyers because they are unwilling to buy any of the products at a price higher than the equilibrium.

Question 16

In the South African labor market

Accepted Answer

A)  workers celebrated minimum wages above market equilibrium wages. 
B)  above-market equilibrium wages have been shown to work and keep most workers employed. 
C)  workers begged the government to allow below-minimum wage factories to stay open,reasoning that any job is better than no job. 
D)  despite unemployment,minimum wage laws have made incomes more equal. 
E)  the minimum wage works because it is nonbinding. 
A)  workers celebrated minimum wages above market equilibrium wages. 
B)  above-market equilibrium wages have been shown to work and keep most workers employed. 
C)  workers begged the government to allow below-minimum wage factories to stay open,reasoning that any job is better than no job. 
D)  despite unemployment,minimum wage laws have made incomes more equal. 
E)  the minimum wage works because it is nonbinding.

Question 17

What will an individual do differently as a buyer in the black market in the long run?

Accepted Answer

A)  He or she will substitute away from the product. 
B)  He or she will substitute toward the product. 
C)  When a binding price floor exists,he or she will be willing to pay a higher price. 
D)  When a binding price ceiling exists,he or she will be willing to pay a lower price. 
E)  What he or she does as a buyer in the long run will be no different from what he or she does in the short run. 
A)  He or she will substitute away from the product. 
B)  He or she will substitute toward the product. 
C)  When a binding price floor exists,he or she will be willing to pay a higher price. 
D)  When a binding price ceiling exists,he or she will be willing to pay a lower price. 
E)  What he or she does as a buyer in the long run will be no different from what he or she does in the short run.

Question 18

Use the following table to answer the following questions.
  
-What is the surplus when the price floor is $0.75 in the market for public transportation?

Accepted Answer

A)  100,000 
B)  86,000 
C)  75,000 
D)  116,000 
E)  0 (zero) 
A)  100,000 
B)  86,000 
C)  75,000 
D)  116,000 
E)  0 (zero)

Question 19

The usual stated political goal of rent control is

Accepted Answer

A)  to conduct social engineering via economic rules. 
B)  to pander to real estate landlords by assuring them a low occupancy rate. 
C)  to pander to the low income voters by assuring them enough living space. 
D)  to assist the low income at a cost to society,in convenient,affordable housing. 
E)  prices that allow rationing to the highest bidder. 
A)  to conduct social engineering via economic rules. 
B)  to pander to real estate landlords by assuring them a low occupancy rate. 
C)  to pander to the low income voters by assuring them enough living space. 
D)  to assist the low income at a cost to society,in convenient,affordable housing. 
E)  prices that allow rationing to the highest bidder.

Question 20

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families.The law that sets wages would be an example of a

Accepted Answer

A)  minimum wage law. 
B)  fair wage law. 
C)  price ceiling. 
D)  black market price. 
E)  ration price. 
A)  minimum wage law. 
B)  fair wage law. 
C)  price ceiling. 
D)  black market price. 
E)  ration price.

Exam 6: Price Controls

An example of a binding price ceiling is ________ the equilibrium price.

What is the incentive to create a black market when a binding price ceiling exists?

Which is a correct statement about a rent control law?

Jamie,an economics student,was just named Miss Florida,based in part on her answer to the question of why price gouging laws should be relaxed in that state.Jamie won because she gave which of the following answers?

What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is $1.75?

Use the following table to answer the following questions. -If a minimum wage is set at $5.50,what is the amount of disequilibrium in the labor market?

Why is raising the minimum wage generally ineffective?

What will happen in a market where a binding price ceiling is removed?

A binding minimum wage will increase the income of

If a price ceiling or price floor existed where one lives,would he or she be willing to purchase products on the black market? What would he or she identify as a consequence to engaging in transactions on the black market over the short run and the long run?

What reasons are given by government to enact price controls?

If a good is subject to a binding price ceiling and one purchases it on the black market,what can one expect to happen to the availability of the good over time?

Why is it often difficult to remove a binding price floor after it exists?

Which of the following is a correct statement?

Do all buyers benefit from a binding price ceiling?

In the South African labor market

What will an individual do differently as a buyer in the black market in the long run?

Use the following table to answer the following questions. -What is the surplus when the price floor is $0.75 in the market for public transportation?

The usual stated political goal of rent control is

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families.The law that sets wages would be an example of a

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Elasticity

Market Outcomes and Tax Incidence

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings,interest Rates,and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

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