Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

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

Question 4

A price ceiling will not have an immediate effect if:

Accepted Answer

A)  it is set above the equilibrium price. 
B)  the equilibrium price is above the price ceiling. 
C)  it is set below the equilibrium price. 
D)  it creates a shortage. 
A)  it is set above the equilibrium price. 
B)  the equilibrium price is above the price ceiling. 
C)  it is set below the equilibrium price. 
D)  it creates a shortage.

Question 5

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?

Accepted Answer

A)  More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price. 
B)  The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price. 
C)  More people will be able to see the doctor, since the price is lower. 
D)  Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price. 
A)  More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price. 
B)  The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price. 
C)  More people will be able to see the doctor, since the price is lower. 
D)  Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price.

Question 6

Use the following to answer questions:  
-(Figure: Rent Controls) Use Figure: Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

Accepted Answer

A)  Rent3 
B)  Rent4 
C)  Rent1 
D)  Rent2 
A)  Rent3 
B)  Rent4 
C)  Rent1 
D)  Rent2

Question 7

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 8

Use the following to answer questions:  
-(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches. How much total surplus would be lost if there were a quota of eight sandwiches that could be legally exchanged?

Accepted Answer

A)  $3 
B)  $24 
C)  $27 
D)  $30 
A)  $3 
B)  $24 
C)  $27 
D)  $30

Question 9

Quotas are more effective than price controls because, unlike price controls, quotas do not cause deadweight loss.

Accepted Answer

A) True 
 B)False

Question 10

(Figure: The Market for Clams) Use Figure: The Market for Clams. The government imposes a quota limiting sales of clams to 1,000 pounds. According to the figure, the quota rent per pound in this case is:

Accepted Answer

A)  $7.50. 
B)  $5.00. 
C)  $2.50. 
D)  The quota rent cannot be determined from the information provided. 
A)  $7.50. 
B)  $5.00. 
C)  $2.50. 
D)  The quota rent cannot be determined from the information provided.

Question 11

Use the following to answer questions:  
-(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 12

Price ceilings will impose costs on society because they:

Accepted Answer

A)  will eliminate long waiting lines. 
B)  may result in black markets, where prices are lower than the market-determined price would be. 
C)  lead to a smaller quantity offered on the market. 
D)  help businesses instead of consumers. 
A)  will eliminate long waiting lines. 
B)  may result in black markets, where prices are lower than the market-determined price would be. 
C)  lead to a smaller quantity offered on the market. 
D)  help businesses instead of consumers.

Question 13

Use the following to answer questions:  
-(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 14

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be:

Accepted Answer

A)  an excess supply of doctor visits. 
B)  an excess demand for doctor visits. 
C)  an increase in the equilibrium number of doctor visits. 
D)  no change in the number of doctor visits. 
A)  an excess supply of doctor visits. 
B)  an excess demand for doctor visits. 
C)  an increase in the equilibrium number of doctor visits. 
D)  no change in the number of doctor visits.

Question 16

Use the following to answer questions:  
-(Table: The Market for Taxi Rides) Use Table: The Market for Taxi Rides. If a government quota limit at 7 million rides is imposed on this market, the quota rent that will accrue 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 17

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound. The government's actions will:

Accepted Answer

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

Question 18

Use the following to answer questions:  
-(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent3:

Accepted Answer

A)  the shortage of rental units is the distance Q3 - Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q3 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  rent will remain at Rent2. 
A)  the shortage of rental units is the distance Q3 - Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q3 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  rent will remain at Rent2.

Question 19

Use the following to answer questions:  
-(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda supplied will be _____ cans.

Accepted Answer

A)  7 
B)  8 
C)  9 
D)  10 
A)  7 
B)  8 
C)  9 
D)  10

Question 20

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.

In Europe, the minimum wage has led to:

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

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

A price ceiling will not have an immediate effect if:

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

If the government imposes binding rent control:

Use the following to answer questions: -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches. How much total surplus would be lost if there were a quota of eight sandwiches that could be legally exchanged?

Quotas are more effective than price controls because, unlike price controls, quotas do not cause deadweight loss.

(Figure: The Market for Clams) Use Figure: The Market for Clams. The government imposes a quota limiting sales of clams to 1,000 pounds. According to the figure, the quota rent per pound in this case is:

Use the following to answer questions: -(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.

Price ceilings will impose costs on society because they:

Use the following to answer questions: -(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?

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be:

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound. The government's actions will:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₃:

Use the following to answer questions: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda supplied will be _____ cans.

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

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 4: Price Controls and Quotas: Meddling With Markets

In Europe, the minimum wage has led to:

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

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

A price ceiling will not have an immediate effect if:

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

If the government imposes binding rent control:

Use the following to answer questions: -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches. How much total surplus would be lost if there were a quota of eight sandwiches that could be legally exchanged?

Quotas are more effective than price controls because, unlike price controls, quotas do not cause deadweight loss.

(Figure: The Market for Clams) Use Figure: The Market for Clams. The government imposes a quota limiting sales of clams to 1,000 pounds. According to the figure, the quota rent per pound in this case is:

Use the following to answer questions: -(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.

Price ceilings will impose costs on society because they:

Use the following to answer questions: -(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?

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be:

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound. The government's actions will:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent3:

Use the following to answer questions: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda supplied will be _____ cans.

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

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Use the following to answer questions: -(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.

Use the following to answer questions: -(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?

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₃: