Exam 5: Price Controls and Quotas: Meddling With Markets

Figure: Price Controls (Figure: Price Controls) Look at the graph Price Controls.An effective price floor would be at price ________ and a ________ would result of the difference between points _. A.c; surplus; f and e B.b; surplus; f and e C.d; shortage; i and h D.b; shortage; f and e

Figure: Market I (Figure: Market I) Look at the figure Market I.If a price floor of $15 was imposed on this market and the government chose to purchase the surplus, the government would need to buy ________ units of the good and spend a total amount of on its purchase. A.5; $75 B.10; $150 C.9; $135 D.9; $81

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on the drug manufacturers.If this happened, the quality of drugs would improve.

When the government policy is to regulate the quantity of a good that can be bought and sold rather than the price at which it is transacted, it uses a A.quota B.price control C.price ceiling D.price floor

(Table: The Market for Soda) Look at the table The Market for Soda.If the government imposes a price ceiling of $1.00 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 Sandwiches (Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches.Referring again to the market for sandwiches during the lunch hour at a local deli, suppose a price floor is set at $7.At this price, consumer surplus is equal to and producer surplus is equal to _. A.$64; $40 B.$64; $24 C.$32; $24 D.$32; $40

Figure: The Market for Round-Trip Airline Flights (Figure: The Market for Round-Trip Airline Flights) Look at the figure The Market for Round-Trip Airline Flights.The supply and demand graph represents the market for round-trip airline flights between Boston and New York.Suppose the mayor of New York decides to limit the number of flights to Q₁ to reduce air pollution.What area or areas represent producer surplus after the quota is in place? A.A B.a + b + c C.c + e D.b + d + f

A price ceiling is likely to result in: A.a persistent surplus, a transfer of surplus from producers to consumers, and deadweight loss. B.a persistent shortage, a transfer of surplus from producers to consumers, and deadweight loss. C.a persistent shortage, a transfer of surplus from consumers to producers, and no deadweight loss. D.a persistent surplus, a transfer of surplus from consumers to producers, and deadweight loss.

Hugo Chávez is the president of Venezuela.Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy.Suppose President Chávez enacts a government policy that reduces the customer price of gasoline sold at state-owned gas stations to 50% of the previous price.In theory, this policy will result in the quantity of gasoline demanded to be the quantity of gasoline supplied. A.equal to B.greater than C.less than D.greater than or equal to

A price ceiling benefits all consumers.

An effective price floor will lead to: A.quantity demanded being greater than quantity supplied. B.a resulting excess supply or a surplus. C.the need for government to produce more of the good. D.suppliers determining the amount of the good bought and sold in the market.

A price ceiling is: 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.

Suppose the state of Mississippi creates a price floor in the market for cotton.If the floor is set below the current market-clearing price for cotton, the floor will cause a surplus of cotton.

Each of the following is a source of inefficiency from a rent-control price ceiling except: A.inefficiently low quantity of the good exchanged. B.wasted resources of consumers searching for the good. C.inefficient allocation of the good to consumers. D.inefficiently high quality of the good being sold.

A rent control scheme setting a maximum amount of rent paid below the equilibrium rental price would most likely be supported by which of the following groups? A.people who wish to rent such an apartment B.people who own rental apartments C.both renters and owners D.neither renters nor owners

An effective price floor would result in: A.a surplus of the good. B.a shortage of the good. C.a quantity control. D.an equilibrium price.

Figure: The Market for Hybrid Cars (Figure: Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars.What area represents deadweight loss if there is a binding price floor at P₁? A.a + b + c B.b + c + d + e C.c + e D.c

(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded.Excess supply would exist in this market if a price floor equal to ________ was imposed in this market. A.$5 B.$10 C.$15 A.$20

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

When the government imposes a limit on sales of a good or service by a quota, it usually issues a license that gives the owner the right to sell a given quantity of the good.The market price of the license is equal to: A.the demand price of the good. B.the wedge that represents the difference between the demand price and the supply price. C.the quota rent. D.the quota rent and the wedge that represents the difference between the demand price and the supply price.