Exam 5: Price Controls and Quotas: Meddling With Markets

The NFL wants to give the "common fan" the opportunity to attend the Super Bowl, so it sets Super Bowl prices "low"-tickets for a regular seat at Super Bowl XXXVII cost just $400.Scalpers, however, sell tickets for $1,500 or more.If there are no transaction costs to selling a ticket, the true cost of a regular ticket to Super Bowl XXXVII is: A.at most $400. B.at least $1,500. C.the monetary price paid to obtain the ticket. D.$1,100 less than the opportunity cost of a ticket.

Table: Market for Apartments (Table: Market for Apartments) Look at the table Market for Apartments.If a government price ceiling of $900 is imposed on this market, an inefficiency will result in the form of a: A.surplus of 0.6 million apartments. B.shortage of 0.6 million apartments. C.surplus of 0.2 million apartments. D.shortage of 0.2 million apartments.

How does a price ceiling create deadweight loss in the market?

If the government imposes rent control and it is binding:

In Europe, the minimum wage has led to all of the following except: A.high unemployment, especially among young workers. B.a proliferation of tiny 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 binding minimum wage will generally cause increased unemployment for low-skilled workers.

Figure: The Market for Butter (Figure: The Market for Butter) Look at the figure The Market for Butter.If a government price floor at $1.30 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.

Quotas often: A.result in few incentives to engage in illegal activities. B.lead to deadweight losses resulting from a wedge between the price of sellers and that of demanders. C.create more efficient market outcomes. D.are necessary to increase the quantity of the goods in the market.

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 wants to increase his popularity with the citizens of Venezuela and enacts a government policy that reduces the customer price of gasoline sold at state-owned gas stations to 50% of the previous price.This policy is called a: A.price control. B.price floor. C.price ceiling. D.quota.

Black markets may develop with price controls because:

The demand price of a given quantity of doughnuts is the price at which consumers will demand that quantity of doughnuts.The supply price of donuts is the price at which donut producers will supply that quantity of doughnuts.

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 500 pounds, the quota rent per pound is: A.$15. B.$10. C.$5. D.The quota rent cannot be determined from the information provided.

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 200.The resulting deadweight loss is equal to: A.$750. B.$375. C.$250. D.$0.

The National Football League does not have a licensing process for quarterbacks.This means that the free market determines the standards that an aspiring quarterback must achieve.

In a black market, goods or services are bought and sold: A.at night. B.without any information about quality. C.without any information about price. D.illegally.

Table: Market for Apartments (Table: Market for Apartments) Look at the table Market for Apartments.If a government price ceiling of $700 is imposed on this market, an inefficiency will result in the form of a: A.surplus of 0.6 million apartments. B.shortage of 0.6 million apartments. C.surplus of 0.2 million apartments. D.shortage of 0.2 million apartments.

Table: Market for Apartments (Table: Market for Apartments) Look at the table Market for Apartments.If a government price ceiling of $600 is imposed on this market, an inefficiency will result in the form of a: A.surplus of 0.6 million apartments. B.surplus of 0.8 million apartments. C.shortage of 0.8 million apartments. D.shortage of 0.6 million apartments.

An increase in producer surplus would most likely occur if: A.an effective price floor was imposed. B.an effective price ceiling was imposed. C.the market price of the good decreased. D.no changes occurred in the market.

Governments continue to impose price controls.Which of the following is not a valid reason for this? A.Some people do benefit from such price controls. B.People fear that prices will change dramatically if the price controls were removed. C.It is politically expedient to enact regulations that benefit influential voting groups. D.Price controls are always effective.

A price ceiling will have no effect if: A.it is set above the equilibrium price. B.the equilibrium price is above the price ceiling. C.it is set below the equilibrium price. D.it creates a shortage.