Question 1

A price control is:

Accepted Answer

A)  control of the price of a good by the firm that produces it. 
B)  a legal restriction on how high or low a price in a market may go. 
C)  an upper limit on the quantity of some good that can be bought or sold. 
D)  a tax on the sale of a good that controls the market price. 
A)  control of the price of a good by the firm that produces it. 
B)  a legal restriction on how high or low a price in a market may go. 
C)  an upper limit on the quantity of some good that can be bought or sold. 
D)  a tax on the sale of a good that controls the market price.

Question 2

An agricultural market price support policy establishes a binding price floor, which:

Accepted Answer

A)  decreases the price paid by consumers. 
B)  does not change the price paid by consumers. 
C)  increases the price received by farmers. 
D)  decreases the price received by farmers. 
A)  decreases the price paid by consumers. 
B)  does not change the price paid by consumers. 
C)  increases the price received by farmers. 
D)  decreases the price received by farmers.

Question 3

Use the following to answer questions:  
-(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 4

A binding rent-control price ceiling does NOT result in:

Accepted Answer

A)  inefficiently low transaction costs. 
B)  wasted resources of consumers caused by time spent searching for the good. 
C)  inefficient allocation of the good to consumers. 
D)  inefficiently high quality of the good being sold. 
A)  inefficiently low transaction costs. 
B)  wasted resources of consumers caused by time spent searching for the good. 
C)  inefficient allocation of the good to consumers. 
D)  inefficiently high quality of the good being sold.

Question 5

The quota rent is the:

Accepted Answer

A)  difference between the demand price and the supply price at the quota limit. 
B)  rent received by landlords who own rent-controlled apartments. 
C)  opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota. 
D)  minimum rent that the owner of a building must receive before he or she is willing to rent out the building. 
A)  difference between the demand price and the supply price at the quota limit. 
B)  rent received by landlords who own rent-controlled apartments. 
C)  opportunity cost of using a quota-controlled service or of buying a good that is subject to an import quota. 
D)  minimum rent that the owner of a building must receive before he or she is willing to rent out the building.

Question 6

One of the ways rent control is inefficient is that it leads to:

Accepted Answer

A)  higher-quality apartments. 
B)  high opportunity costs associated with wasted time searching for apartments. 
C)  markets that maximize total surplus. 
D)  the construction of more apartments. 
A)  higher-quality apartments. 
B)  high opportunity costs associated with wasted time searching for apartments. 
C)  markets that maximize total surplus. 
D)  the construction of more apartments.

Question 7

Use the following to answer questions:  
-(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium rent is:

Accepted Answer

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

Question 8

A price ceiling is:

Accepted Answer

A)  a maximum price sellers are allowed to charge for a good or service. 
B)  the difference between the quantity supplied and quantity demanded. 
C)  a minimum price buyers are required to pay for a good or service. 
D)  the deadweight loss caused by an inefficiently low quantity. 
A)  a maximum price sellers are allowed to charge for a good or service. 
B)  the difference between the quantity supplied and quantity demanded. 
C)  a minimum price buyers are required to pay for a good or service. 
D)  the deadweight loss caused by an inefficiently low quantity.

Question 9

If the demand curve for clams is downward sloping and the supply curve is upward sloping, a quota that is set above the equilibrium quantity will have no immediate effect on the market.

Accepted Answer

A) True 
 B)False

Question 10

A binding price ceiling is usually designed to:

Accepted Answer

A)  keep prices below the equilibrium level. 
B)  increase the quality of the good. 
C)  prevent shortages. 
D)  increase efficiency. 
A)  keep prices below the equilibrium level. 
B)  increase the quality of the good. 
C)  prevent shortages. 
D)  increase efficiency.

Question 11

The likely result of a binding price floor is a _____ of the good at a price _____ the equilibrium price.

Accepted Answer

A)  surplus; above 
B)  shortage; below 
C)  surplus; below 
D)  shortage; above 
A)  surplus; above 
B)  shortage; below 
C)  surplus; below 
D)  shortage; above

Question 12

If the demand curve for clams is downward sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 13

A quota rent for tuna is the difference between the demand price and the supply price if a quota limit is imposed in the tuna market.

Accepted Answer

A) True 
 B)False

Question 14

Which statement is a reason for governments imposing or maintaining price controls?

Accepted Answer

A)  Some consumers and producers can benefit from price controls. 
B)  Price controls prevent the deadweight loss that occurs when the market is in equilibrium. 
C)  The government earns revenue from price controls. 
D)  Price controls improve the efficiency of the market. 
A)  Some consumers and producers can benefit from price controls. 
B)  Price controls prevent the deadweight loss that occurs when the market is in equilibrium. 
C)  The government earns revenue from price controls. 
D)  Price controls improve the efficiency of the market.

Question 15

Use the following to answer questions:  
-(Figure: Supply and Demand in Agriculture) Use Figure: Supply and Demand in Agriculture. If a price floor at P4 is set to help improve farm incomes and the government wants to assure farmers that their output will be purchased, the government must purchase an amount of output equal to:

Accepted Answer

A)  Q3 - Q0. 
B)  Q3 - Q1. 
C)  Q2 - Q1. 
D)  Q1 - Q3. 
A)  Q3 - Q0. 
B)  Q3 - Q1. 
C)  Q2 - Q1. 
D)  Q1 - Q3.

Question 16

Which example would be considered a price floor?

Accepted Answer

A)  a rent-controlled apartment 
B)  a maximum legal price that could be charged for gasoline during a time of war 
C)  the minimum wage 
D)  a government decree that capped the price of bottled water in the aftermath of a devastating hurricane 
A)  a rent-controlled apartment 
B)  a maximum legal price that could be charged for gasoline during a time of war 
C)  the minimum wage 
D)  a government decree that capped the price of bottled water in the aftermath of a devastating hurricane

Question 17

Black markets may develop as a result of price controls because:

Accepted Answer

A)  price controls increase efficiency. 
B)  quantity demanded equals quantity supplied at the mandated price. 
C)  price controls offer subsidies for market transactions. 
D)  individuals can profit by illegal exchanges. 
A)  price controls increase efficiency. 
B)  quantity demanded equals quantity supplied at the mandated price. 
C)  price controls offer subsidies for market transactions. 
D)  individuals can profit by illegal exchanges.

Question 18

If the government imposes a limit on sales of a good or service by licensing the right to sell a given quantity of the good, the difference between the demand and supply price is:

Accepted Answer

A)  the quota rent. 
B)  the equilibrium price. 
C)  the quota price. 
D)  deadweight loss. 
A)  the quota rent. 
B)  the equilibrium price. 
C)  the quota price. 
D)  deadweight loss.

Question 19

The difference between the demand price and the supply price at the quota limit is:

Accepted Answer

A)  the quota rent. 
B)  the rent received by landlords who own rent-controlled apartments. 
C)  the opportunity cost of using or buying a good, subject to an import quota. 
D)  usually large enough to cause a surplus. 
A)  the quota rent. 
B)  the rent received by landlords who own rent-controlled apartments. 
C)  the opportunity cost of using or buying a good, subject to an import quota. 
D)  usually large enough to cause a surplus.

Question 20

Use the following to answer questions:  
-(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent1:

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 Q1 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  there will be a surplus of rental units, but it is impossible to tell how large the surplus is based on the information provided. 
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 Q1 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  there will be a surplus of rental units, but it is impossible to tell how large the surplus is based on the information provided.

A price control is:

An agricultural market price support policy establishes a binding price floor, which:

Use the following to answer questions: -(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:

A binding rent-control price ceiling does NOT result in:

The quota rent is the:

One of the ways rent control is inefficient is that it leads to:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium rent is:

A price ceiling is:

If the demand curve for clams is downward sloping and the supply curve is upward sloping, a quota that is set above the equilibrium quantity will have no immediate effect on the market.

A binding price ceiling is usually designed to:

The likely result of a binding price floor is a _ of the good at a price _ the equilibrium price.

If the demand curve for clams is downward sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

A quota rent for tuna is the difference between the demand price and the supply price if a quota limit is imposed in the tuna market.

Which statement is a reason for governments imposing or maintaining price controls?

Which example would be considered a price floor?

Black markets may develop as a result of price controls because:

If the government imposes a limit on sales of a good or service by licensing the right to sell a given quantity of the good, the difference between the demand and supply price is:

The difference between the demand price and the supply price at the quota limit is:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁:

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

A price control is:

An agricultural market price support policy establishes a binding price floor, which:

Use the following to answer questions: -(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:

A binding rent-control price ceiling does NOT result in:

The quota rent is the:

One of the ways rent control is inefficient is that it leads to:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium rent is:

A price ceiling is:

If the demand curve for clams is downward sloping and the supply curve is upward sloping, a quota that is set above the equilibrium quantity will have no immediate effect on the market.

A binding price ceiling is usually designed to:

The likely result of a binding price floor is a _____ of the good at a price _____ the equilibrium price.

If the demand curve for clams is downward sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

A quota rent for tuna is the difference between the demand price and the supply price if a quota limit is imposed in the tuna market.

Which statement is a reason for governments imposing or maintaining price controls?

Which example would be considered a price floor?

Black markets may develop as a result of price controls because:

If the government imposes a limit on sales of a good or service by licensing the right to sell a given quantity of the good, the difference between the demand and supply price is:

The difference between the demand price and the supply price at the quota limit is:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent1:

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

The likely result of a binding price floor is a _ of the good at a price _ the equilibrium price.

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁: