Exam 5: Markets in Action

In practice, legislated rent controls are usually intended

FIGURE 5- 3 -Refer to Figure 5- 3. P2 represents a price imposed by the government. What is the quantity of this good that would be exchanged in the market?

FIGURE 5- 2 -Refer to Figure 5- 2. A price floor set at $2.50 will result in

Suppose the demand for eggs is inelastic and that the market- clearing price is $1.50 per dozen. Now suppose the government imposes a minimum price of $2.00 per dozen. Why might the government implement such a policy?

Assuming that the long- run supply of housing is more _ than the short- run supply, the imposition of binding rent controls will generally .

The use of legislated rent controls typically

If the government imposes an administered price in the market for gold that results in excess supply,

$\text { Demand and Supply Schedules for Chocolate Bars }$ $\begin{array}{|c|c|c|}\hline \begin{array}{c}\text { Price } \\(\$)\end{array} & \begin{array}{c}\text { Quantity Demanded } \\\text { (thousandsperweek) }\end{array} & \begin{array}{c}\text { Quantity Supplied } \\\text { (thousands per week) }\end{array} \\\hline 2.00 & 1500 & 2100 \\\hline 1.80 & 1600 & 2050 \\\hline 1.60 & 1700 & 2000 \\\hline 1.40 & 1800 & 1950 \\\hline 1.20 & 1900 & 1900 \\\hline 1.00 & 2000 & 1850 \\\hline 0.80 & 2100 & 1800 \\\hline 0.60 & 2200 & 1750 \\\hline 0.40 & 2300 & 1700 \\\hline\end{array}$ $\text { TABLE 5-1 }$ -Refer to Table 5- 1. Suppose the government established a price floor of $1.00 per chocolate bar. How many thousands of chocolate bars would be exchanged per week?

In competitive markets, binding price floors and binding price ceilings lead to

Consider the market for pulp and paper. Suppose, in an attempt to help this industry, the government sets a price floor above the free- market equilibrium price. The result will be:

A legal price floor is a

FIGURE 5- 5 -Refer to Figure 5- 5. At the market- clearing price and quantity of $30 per hour and 4000 hours of gardening services purchased, the economic surplus is

If the equilibrium price for some product is $1000, a price ceiling of $800 will result in

FIGURE 5- 5 -Refer to Figure 5- 5. If production and consumption of gardening services were 5000 hours per month

The diagram below shows the market for apartments in a city. Assume that all apartments are identical. FIGURE 5- 4 -Refer to Figure 5- 4. Suppose the government imposes a rent- controlled price of $600 per month on apartments in this city. In the short run we can expect the shortage of apartments to be units.

Which of the following is true of price ceilings?

The shortage of housing that exists in the presence of binding rent controls is smaller

Suppose a binding output quota is imposed in a previously competitive market with free- market equilibrium price and quantity. The result is

FIGURE 5- 1 -Refer to Figure 5- 1. With a price ceiling of P3, how large will the resulting shortage be?

Output quotas are commonly used in markets for