Exam 5: Price Controls and Quotas: Meddling With Markets

Figure: The Market for English Textbooks (Figure: The Market for English Textbooks) Look at the figure The Market for English Textbooks.With a binding price floor at $90 in the market, the market outcome would be: A.a surplus of 45 textbooks. B.a surplus of 30 textbooks. C.a shortage of 45 textbooks. D.a shortage of 30 textbooks.

(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, the quantity of soda demanded will be: A.10 cans. B.8 cans. C.6 cans. D.4 cans.

Figure: The Market for Milk (Figure: The Market for Milk) Look at the figure The Market for Milk.If there were a binding price floor in the market for milk, the price could be equal to , consumers would demand ________, and producers would supply _. A.P₁; Q₁; Q₃ B.P₂; Q₂; Q₂ C.P₁; Q₃; Q₁ D.P₃; Q₃; Q₁

To dispose of the unwanted surplus resulting from agricultural price floors, the European Union pays exporters to sell products at a loss overseas.

Suppose that a binding price floor is in place in a particular market.If the market is deregulated and the price floor is removed, which of the following effects could occur? A.The quantity demanded would decrease and the quantity supplied would increase. B.An excess demand would develop. C.There would be a decrease in the quality of the good supplied. D.There would be an increase in the quality of the good supplied.

Quota limits cause: A.the demand price to be greater than the supply price. B.the quantity demanded to be greater than the quantity supplied. C.the quantity demanded to be less than the quantity supplied. D.the demand price to be less than the supply price.

A price floor or a price ceiling is an example of:

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's visit at $20 to control rising health costs but the current market price is $40.What will happen? 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.

All else equal, if a price floor that is above the equilibrium price is imposed on a market and the government buys the surplus, what will happen to consumer and producer surplus? A.Consumer surplus will fall and producer surplus will rise. B.Consumer surplus will fall and producer surplus will fall. C.Consumer surplus will rise and producer surplus will fall. D.Consumer surplus will rise and producer surplus will rise.

(Table: Market for Butter) Look at the figure Market for Butter.If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be:

Figure: The Market for Sandwiches (Figure: The Market for Sandwiches) Look again at the figure The Market for Sandwiches.How much total surplus would be lost if there were a quota of only eight sandwiches that could be legally exchanged at a price of $5? A.$3 B.$72 C.$27 D.$32

A price ceiling will create a persistent and a price floor will create a persistent ________. A.surplus; surplus B.shortage; surplus C.shortage; shortage D.surplus; shortage

Figure: The Shrimp Market (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government wants to limit shrimp sales to 500 pounds, it could impose a: A.price floor of $15. B.price floor of $10. C.price ceiling of $10. D.price floor of $15 or a price ceiling of $10.

Figure: Market I (Figure: Market I) Look at the figure Market I.A price floor at $15 would result in deadweight loss of A.$9 B.$10 C.$20 D.$40.50

Figure: Rent Controls (Figure: Rent Controls) Look at the figure Rent Controls.If rent controls are set at Rent0, renters would be willing to pay a price at least as high as _. A.Rent4 for Q0 units B.Rent4 for Q₁ units C.Rent3 for Q₁ units D.No one would be willing to pay a higher actual price than Rent0.

Figure: The Market for Hotel Rooms (Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms The local government limits the number of hotel rooms rented each night to 150.The resulting quota rent per room is equal to: A.$130. B.$100. C.$110. D.$30.

Suppose the U.S.government imposes a binding quota on the number of Japanese-made cars allowed into the United States.We would expect the price of Japanese cars to ________ and the price of U.S.-made cars to _. A.increase; increase B.increase; decrease C.decrease; increase D.decrease; decrease

Figure: Supply and Demand in Agriculture (Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in Agriculture.If the equilibrium price for wheat is as shown in the graph, how could the government help increase farmers' income? A.A price floor could be set at P₄, causing a surplus of Q₃ - Q0. B.A price floor could be set at P₂, causing a surplus of Q₂ - Q0. C.A price ceiling could be set at P₄, causing a surplus of Q₂ - Q₁. D.A price floor could be set at P₁, causing a shortage of Q₃ - Q0.

The government decides to impose a price ceiling on a good because it thinks the market- determined price is "too high." If the government imposes the price ceiling below the equilibrium price: A.consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price. B.producers will respond to the lower price and offer more units for sale. C.consumers will be able to purchase more of the good after the price ceiling is imposed. D.it will not be binding.

Inefficient allocations of goods to consumers often result from: A.price ceilings. B.producer surplus. C.equilibrium prices. D.consumer surplus.