Exam 5: Price Controls and Quotas: Meddling With Markets

In Europe the minimum wage has led to: 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 maximum price legislated by the government is called:

When price controls take the form of maximum prices set below the equilibrium price, they are: A.illegal. B.equal to the demand price. C.price floors. D.price ceilings.

Figure: Price Controls (Figure: Price Control) Look at the figure Price Controls.A price ceiling has been imposed at point d.Identify the areas that correspond to the consumer surplus, producer surplus, and deadweight loss with this price control.In addition, identify the area that represents lost producer surplus that has been transferred to consumers as a result of this policy.

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55.This price floor will: A.cause a surplus of corn. B.cause a shortage of corn. C.have no effect on the price of corn. D.increase the supply of corn.

Rent controls in New York City cause all of the following except: A.inefficiently low quality. B.wasted resources resulting from the opportunity cost of time associated with trying to find an apartment. C.black markets. D.an increase in the quantity supplied of rent-controlled apartments.

Which of the following is an example of a quantity control? A.the Medicare reimbursement schedule for physicians. B.the minimum wage. C.unemployment insurance. D.limits on the number of red snappers that can be caught in the Gulf of Mexico.

Which of the following is an example of a price floor?

If minimum wages are set above the equilibrium wage in the market, then the number of workers hired will be the number of people who are willing to work. A.less than B.greater than C.equal to D.either less than, greater than, or equal to

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50.The Saudi government's actions will: A.improve efficiency, since the low prices will force producers to find cheaper production methods. B.result in gasoline surpluses even in an oil-rich country. C.cause gasoline shortages even in an oil-rich country. D.improve equality between rich and poor, since the poor can now afford gasoline.

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 pumpkin farmers in Minnesota.

Figure: Price Control (Figure: Price Control) Look at the figure Price Control.In the graph, one effective price ceiling would be the price indicated at point________ and a would exist equal to the difference between points _. A.b; surplus; f and e B.b; shortage; f and e C.d; shortage; i and h D.d; surplus; e and h

Which of the following is an example of a black market? A.a tenant in a rent-controlled apartment subletting at a higher rent B.the purchase of an inferior radio at a department store C.waiting in line during the gasoline shortages of the 1970s D.the oil market

When a price ceiling is imposed, this results in: A.inefficiency resulting from overproduction of the good. B.inefficiency due to a reduction in the quantity of the good transacted below the equilibrium quantity. C.a decrease in wasted resources as consumers find such goods more easily. D.surpluses in the market, which eventually lead to inefficient production costs.

Figure: The Market for Butter (Figure: The Market for Butter) Look at the figure The Market for Butter.If a government price floor at $1.10 is imposed on this market, an inefficiency will result in the form of a: A.surplus of 4.5 million pounds of butter. B.shortage of 4.5 million pounds of butter. C.surplus of 1.5 million pounds of butter. D.shortage of 1.5 million pounds of butter.

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling: A.it is inefficient. B.we say that the transaction takes place on a black market. C.there is an increase in quantity demanded. D.there is a decrease in quantity demanded.

Farmers in developing countries want the United States to reduce the subsidies that it gives to American farmers because subsidized agricultural products from the United States: A.lead to agricultural surpluses and lower prices for developing country farmers. B.raise the world price of agricultural products. C.has led to a global shortage of agricultural products. D.has led to an increase in the demand for agricultural products from the developing world.

A binding price floor causes: A.a shortage in the market. B.a surplus in the market. C.wasted resources. D.a surplus in the market and wasted resources.

If a quota is set above the equilibrium quantity, there will be:

A quota is A.a lower limit on the quantity of a good that can be bought or sold. B.an upper limit on the quantity of a good that can be bought or sold. C.a maximum price at which a good can be bought or sold. D.a minimum price at which a good can be bought or sold.