Exam 5: Price Controls and Quotas: Meddling With Markets

Which is not an inefficiency caused by price floors? A.inefficiently low quality B.inefficient allocation of sales among sellers C.wasted resources D.illegal activity

(Figure: Rent Controls) Look at the figure Rent Controls.If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either ________ or _. A.Rent0; Rent1 B.Rent1; Rent3 C.Rent3; Rent4 D.Rent2; Rent4

The American Medical Association has a licensing process for people who aspire to become doctors.This licensing process has probably led to lower earnings for doctors over time.

An effective price ceiling will most likely result in which of the following?

Quantity controls set below the equilibrium quantity cause all of the following except: A.incentives for illegal activities. B.missed opportunities in the form of mutually beneficial transactions that don't occur. C.the supply price of the quantity transacted exceeding the demand price of the quantity transacted. D.quota rents.

(Table: The Market for Salmon) Look at the table The Market for Salmon.The state government has imposed a quota of 6 million pounds and has licensed commercial fishing boats to harvest the salmon.When the quota is reached, the season is over.What is the quota rent per pound of salmon when 6 million pounds is harvested and sold?

The United States and the European Union impose price floors on many agricultural products.These price floors lead to unwanted surpluses.To deal with a surplus: A.the U.S.government typically pays farmers to produce as much as possible. B.the U.S.government in some cases has destroyed the surplus production. C.the European Union pays farm exporters to sell products for a profit overseas. D.the U.S.government holds auctions to sell the surplus to the highest bidder.

Figure: The Market for Economics Textbooks (Figure: The Market for Economics Textbooks) Look at the figure The Market for Economics Textbooks.Suppose the government believes textbooks are too expensive and it wants to make sure textbooks are affordable to more students.This type of price control is called a ________ and one possible price binding price control would be _. A.price floor; $100 B.price floor; $40 C.price ceiling; $40 D.price ceiling; $100

A rent ceiling must be set above the equilibrium rent to be binding.

The total amount of the good that can be transacted under a quantity control is called the A.ceiling price. B.demand price. C.quota limit. D.supply price.

Table: The Market for Taxi Rides (Table: The Market for Taxi Rides) Look at the table The Market for Taxi Rides.If a government quota limit at 6 million rides is imposed on this market, the quota rent accruing to the owner of a taxi medallion will be , but there will be a missed opportunity (inefficiency) to consumers of _. A.$1 per ride; 1 million rides B.$2 per ride; 2 million rides C.$3 per ride; 3 million rides D.$4 per ride; 4 million rides

To be binding, a price floor must be set at a price: A.lower than the equilibrium price. B.higher than the equilibrium price. C.at which quantity demanded exceeds quantity supplied. D.lower than the equilibrium price and at which quantity demanded exceeds quantity supplied.

Figure: Price Controls (Figure: Price Controls) Look at the figure Price Controls.In this graph, a price floor has been imposed at the price shown as point b.The area of deadweight loss that results from this price floor is: A.egh. B.ghi. C.fgi. D.efg.

(Figure: Rent Controls) Look again at the figure Rent Controls.If rent controls are set at Rent3:

(Figure: Rent Controls) Look at the figure Rent Controls.If rent controls are set at Rent1: A.rental apartments may be of inefficiently low quality. B.there will be an efficient allocation of rentals. C.some landlords may break the law by renting below the mandated price. D.new apartments will be constructed.

If government decides to control the amount of a good allowed into a market, this will:

The dictator of a small country restricts the price of cars to an amount less than or equivalent to $1,200 (a price below the equilibrium price for cars).Such a policy would be an example of a: A.price floor. B.price ceiling. C.quota. D.tariff.

Figure: The Shrimp Market (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is: A.$17.50. B.$10. C.$7.50. D.$0.

Which of the following statements is true? I.Quantity controls drive a wedge between the demand price and the supply price of the good.II.The difference between the demand and supply price at the quota limit is referred to as consumer surplus.III.Quantity controls have no undesirable side effects. A.Statement I is true. B.All statements are true. C.Statement II is true. D.Statements II and III are true.

(Table: The Market for Soda) Look at the table The Market for Soda.If the government imposes a price ceiling of $0.50 per can of soda, there will be: A.a shortage of 2 cans. B.a shortage of 3 cans. C.a surplus of 3 cans. D.equilibrium in the market for soda.