Exam 5: Markets in Action

Consider the following demand and supply schedules for some agricultural commodity. Price Quantity Supplied Quantity Demanded \ 10 300 1100 \ 30 500 900 \ 50 700 700 \ 70 900 500 \ 90 1100 300 \ 110 1300 100 TABLE 5- 2 -Refer to Table 5- 2. Consider the market- clearing equilibrium. If the government then required that production increase to 900 units, the deadweight loss that is created is equal to

Which of the following is an example of a black- market transaction?

Who are likely to be the biggest beneficiaries of rent controls?

Consider the market for any agricultural commodity for which there exists a binding output quota and demand is inelastic. One outcome of this situation is that

Assuming that the long- run supply of housing is highly elastic, the imposition of binding rent controls will lead to

Suppose the government decides to eliminate a binding price floor that it had previously imposed on a particular good. It can be expected that

In general (and in the absence of market failures), economic surplus will be maximized and economic efficiency will be achieved

If the free- market equilibrium price for some product is $25, then a legal price ceiling set at $15 will bring about

A price ceiling set below the free- market equilibrium price will result in

If a specific market is quite small relative to the entire economy

If a binding price ceiling is in place and if the demand curve for the product shifts rightward, one consequence would be

FIGURE 5- 1 -Refer to Figure 5- 1. If the diagram applies to the market for rental housing and P3 represents the maximum rent that can be charged, then

If a binding price floor is in place and if the demand curve for the product shifts rightward, one consequence would be

If at some administered price there is excess demand,

Consider the market for iron ore, an important industrial input. Suppose the government sets a price floor below the free- market equilibrium price. The result will be

Government price controls

FIGURE 5- 3 -Refer to Figure 5- 3. P3 represents a price imposed by the government. The result would be

In free and competitive markets, shortages are eliminated by

FIGURE 5- 3 -Refer to Figure 5- 3. To be effective, a price floor must lie

Deadweight loss represents