Exam 5: Price Controls and Quotas: Meddling With Markets

How does an effective price ceiling affect buyers and sellers in a competitive market?

(Table: The Market for Hamburger Flippers) Look at the table The Market for Hamburger Flippers.For hamburger flippers with a minimum wage of $8 per hour, can you imagine a scenario where the deadweight loss from the minimum wage is lessened or even eliminated?

A binding price ceiling is designed to: A.keep prices low. B.increase the quality of the good. C.prevent shortages. D.increase efficiency.

Producers may supply an inefficiently low quality of a good if the government imposes:

Figure: The Market for Butter (Figure: The Market for Butter) Look at the figure The Market for Butter.The figure represents a competitive market for butter.If a government price floor at $1.40 is imposed on this market, an inefficiency will result in the form of a: A.surplus of 4.5 million pounds of butter. B.surplus of 6.0 million pounds of butter. C.shortage of 6.0 million pounds of butter. D.shortage of 4.5.million pounds of butter.

If the U.S.government imposes a quota on the amount of French wine allowed into the United States and the quota is set at a quantity below equilibrium, the price of French wine in the United States will ________ while the U.S.-produced wine will _. A.increase; increase B.increase; decrease C.decrease; increase D.decrease; decrease

Figure: Market I (Figure: Market I) Look at the figure Market I.A price floor of $5 imposed on this market would:

If New York City had no medallion system for taxicabs, the price of a taxicab ride would: A.increase because of the higher safety hazards. B.not change from its current level. C.decrease. D.increase, but only slightly.

Table: The Market for Taxi Rides (Table: Market for Taxi Rides) Look at the table The Market for Taxi Rides.If a government quota limit at 7 million rides is imposed on this market, the quota rent that will accrue 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

How could a minimum wage create an incentive for illegal hiring practices?

A student organization is formed on your college campus to protest against the high rent prices for apartments near campus.This organization is planning a meeting with the dean and president of the college.Which of the following best describes the policy the student organization will fight for? A.a laissez faire policy B.a price floor C.a price ceiling D.a quantity control

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

(Table: The Market for Acupuncture) Look at the table The Market for Acupuncture.The production quota of 20 acupuncture treatments creates a deadweight loss because there are ________ additional transactions that would be welfare improving but would not take place under the quota. A.80 B.60 C.40 D.20

If the government imposes a limit on sales of a good or service by issuing a license that gives the owner the right to sell a given quantity of the good, the difference between the demand and supply price is: A.the quota rent. B.the market price of the license. C.the quota price. D.the quota rent or the market price of the license.

Economists in general agree that rent controls are: A.an efficient and equitable way to help low-income families. B.an inefficient but sometimes effective way to help low-income families. C.an efficient method of dealing with the shortages created during price ceilings. D.the only way to solve the problem of poverty.

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, it would have the same effect as a price ________ of _. A.floor; $17.50 B.floor; $10 floor; C.$7.50 D.The answer cannot be determined from the information provided.

A price floor is likely to cause deadweight loss because: A.buyers incur additional search costs looking for the scarce good. B.the quantity of the good being bought and sold is less than the equilibrium quantity. C.a black market emerges and sellers sell the good at prices above the price floor. D.some buyers who want to buy at the controlled price are unable to find a seller willing to sell at that price.

Price controls: A.always increase economic efficiency. B.always lead to more equitable results. C.can result in inequitable outcomes. D.are always set below the equilibrium price.

The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all its tickets at $25 each.However, outside Symphony Hall, people can sell the same tickets for $75 or more.The true cost to the concertgoer of a ticket to the symphony is at least: A.$25. B.$50. C.$75. D.$100.

(Table: The Market for Acupuncture) Look at the table The Market for Acupuncture.In an effort to regulate this market, the town requires each acupuncture therapist to purchase a license.Initially, the government issues only enough licenses to provide for 20 treatments per month.This quota creates a quota rent equal to: A.$50. B.$100. C.$150. D.$200.