Question 1

Producers may supply a good with inefficiently high quality if the government imposes:

Accepted Answer

A)  a price ceiling set above the equilibrium price. 
B)  a price floor set below the equilibrium price. 
C)  a binding price floor. 
D)  a binding price ceiling. 
A)  a price ceiling set above the equilibrium price. 
B)  a price floor set below the equilibrium price. 
C)  a binding price floor. 
D)  a binding price ceiling.

Question 2

Suppose the Jamaican government sets coffee prices at $1 per pound, when the market price is $10. The government's actions will:

Accepted Answer

A)  improve efficiency, since the low prices will force producers to find cheaper production methods. 
B)  result in coffee surpluses even in a coffee-rich country. 
C)  cause coffee shortages even in a coffee-rich country. 
D)  improve equality between rich and poor, since the poor can now afford coffee. 
A)  improve efficiency, since the low prices will force producers to find cheaper production methods. 
B)  result in coffee surpluses even in a coffee-rich country. 
C)  cause coffee shortages even in a coffee-rich country. 
D)  improve equality between rich and poor, since the poor can now afford coffee.

Question 3

Use the following to answer questions:
Table: Market for Apartments  
-(Table: Market for Apartments) Look at the table Market for Apartments. If a price ceiling of $900 is imposed on this market, the result will be an inefficiency in the form of a _____ million apartments.

Accepted Answer

A)  surplus of 0.6 
B)  shortage of 0.6 
C)  surplus of 0.2 
D)  shortage of 0.2 
A)  surplus of 0.6 
B)  shortage of 0.6 
C)  surplus of 0.2 
D)  shortage of 0.2

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer question:  
-(Table: The Market for Salmon) Look at the table The Market for Salmon. The state government has imposed a quota of 6 million pounds and has licensed commercial fishing boats to harvest the salmon. When the quota is reached, the season is over. What is the quota rent per pound of salmon when 6 million pounds is harvested and sold?

Accepted Answer

The demand price is $27 per po

Question 6

Price ceilings will impose costs on society because they:

Accepted Answer

A)  will eliminate long waiting lines. 
B)  may result in black market prices, which are lower than the market-determined price would be. 
C)  lead to a smaller quantity offered on the market. 
D)  help businesses instead of consumers. 
A)  will eliminate long waiting lines. 
B)  may result in black market prices, which are lower than the market-determined price would be. 
C)  lead to a smaller quantity offered on the market. 
D)  help businesses instead of consumers.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Suppose the United States removes the sugar quotas and the market price of sugar drops. Since sugar is an input in candy, in the candy bar market, we would expect consumer surplus to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  Consumer surplus cannot be determined without information about the supply curve. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  Consumer surplus cannot be determined without information about the supply curve.

Question 9

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

Accepted Answer

A)  a quantity control. 
B)  a price control. 
C)  market equilibrium price. 
D)  a quota. 
A)  a quantity control. 
B)  a price control. 
C)  market equilibrium price. 
D)  a quota.

Question 10

A binding price floor causes:

Accepted Answer

A)  a shortage in the market. 
B)  a surplus in the market. 
C)  wasted resources. 
D)  a surplus in the market and wasted resources. 
A)  a shortage in the market. 
B)  a surplus in the market. 
C)  wasted resources. 
D)  a surplus in the market and wasted resources.

Question 11

A binding price ceiling is designed to:

Accepted Answer

A)  keep prices below the equilibrium level. 
B)  increase the quality of the good. 
C)  prevent shortages. 
D)  increase efficiency. 
A)  keep prices below the equilibrium level. 
B)  increase the quality of the good. 
C)  prevent shortages. 
D)  increase efficiency.

Question 12

Price controls:

Accepted Answer

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. 
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.

Question 13

Use the following to answer questions:
Figure: Rent Controls  
-(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent0:

Accepted Answer

A)  the shortage of rental units is the distance Q1 - Q3. 
B)  some renters will be willing to pay a price as high as Rent4 for Q0 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  there will be a surplus of rental units. 
A)  the shortage of rental units is the distance Q1 - Q3. 
B)  some renters will be willing to pay a price as high as Rent4 for Q0 units. 
C)  no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so. 
D)  there will be a surplus of rental units.

Question 14

If New York City had no medallion system for taxicabs, assuming that the supply curve of taxicab rides is upward-sloping and the demand curve for taxicab rides is downward-sloping, the price of a taxicab ride would:

Accepted Answer

A)  increase because of the higher safety hazards. 
B)  not change from its current level. 
C)  decrease. 
D)  increase, but only slightly. 
A)  increase because of the higher safety hazards. 
B)  not change from its current level. 
C)  decrease. 
D)  increase, but only slightly.

Question 15

Use the following to answer questions:
Figure: Price Controls  
-(Figure: Price Controls) Look at the graph Price Controls. The consumer surplus lost to a price floor at point b is equal to the area:

Accepted Answer

A)  abe. 
B)  egh. 
C)  bcge. 
D)  bcke. 
A)  abe. 
B)  egh. 
C)  bcge. 
D)  bcke.

Question 16

Use the following to answer questions:
Figure: The Market for Economics Textbooks  
-(Figure: The Market for Economics Textbooks) Look at the figure The Market for Economics Textbooks. At a price ceiling of $40, the market outcome would be a _____ of _____ textbooks.

Accepted Answer

A)  surplus; 30 
B)  surplus; 10 
C)  shortage; 30 
D)  shortage; 10 
A)  surplus; 30 
B)  surplus; 10 
C)  shortage; 30 
D)  shortage; 10

Question 17

Quotas, price ceilings, and price floors are all types of quantity controls that the government may impose.

Accepted Answer

A) True 
 B)False

Question 18

Use the following to answer questions:
Figure: The Market for Hybrid Cars  
-(Figure: The 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?

Accepted Answer

A)  a + b + c 
B)  b + c + d + e 
C)  c + e 
D)  c 
A)  a + b + c 
B)  b + c + d + e 
C)  c + e 
D)  c

Question 19

Use the following to answer questions:
Figure: Supply and Demand in Agriculture  
-(Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in Agriculture. The government could help increase farmers' income by setting a price _____ at _____, causing a _____ of _____.

Accepted Answer

A)  floor; P4; surplus; Q3 - Q0 
B)  floor; P2; surplus; Q2 - Q0 
C)  ceiling; P4; surplus; Q2 - Q1 
D)  floor; P1; shortage; Q3 - Q0 
A)  floor; P4; surplus; Q3 - Q0 
B)  floor; P2; surplus; Q2 - Q0 
C)  ceiling; P4; surplus; Q2 - Q1 
D)  floor; P1; shortage; Q3 - Q0

Question 20

Black markets may develop as a result of price controls because:

Accepted Answer

A)  price controls increase efficiency. 
B)  quantity demanded equals quantity supplied at the mandated price. 
C)  individuals cannot profit by illegal exchanges. 
D)  individuals can profit by illegal exchanges. 
A)  price controls increase efficiency. 
B)  quantity demanded equals quantity supplied at the mandated price. 
C)  individuals cannot profit by illegal exchanges. 
D)  individuals can profit by illegal exchanges.

Producers may supply a good with inefficiently high quality if the government imposes:

Suppose the Jamaican government sets coffee prices at $1 per pound, when the market price is $10. The government's actions will:

Use the following to answer questions: Table: Market for Apartments -(Table: Market for Apartments) Look at the table Market for Apartments. If a price ceiling of $900 is imposed on this market, the result will be an inefficiency in the form of a _____ million apartments.

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

Price ceilings will impose costs on society because they:

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

Suppose the United States removes the sugar quotas and the market price of sugar drops. Since sugar is an input in candy, in the candy bar market, we would expect consumer surplus to:

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

A binding price floor causes:

A binding price ceiling is designed to:

Price controls:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent₀:

If New York City had no medallion system for taxicabs, assuming that the supply curve of taxicab rides is upward-sloping and the demand curve for taxicab rides is downward-sloping, the price of a taxicab ride would:

Use the following to answer questions: Figure: Price Controls -(Figure: Price Controls) Look at the graph Price Controls. The consumer surplus lost to a price floor at point b is equal to the area:

Use the following to answer questions: Figure: The Market for Economics Textbooks -(Figure: The Market for Economics Textbooks) Look at the figure The Market for Economics Textbooks. At a price ceiling of $40, the market outcome would be a _ of _ textbooks.

Quotas, price ceilings, and price floors are all types of quantity controls that the government may impose.

Use the following to answer questions: Figure: The Market for Hybrid Cars -(Figure: The 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?

Use the following to answer questions: Figure: Supply and Demand in Agriculture -(Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in Agriculture. The government could help increase farmers' income by setting a price ___ at _, causing a _ of ___.

Black markets may develop as a result of price controls because:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 5: Price Controls and Quotas: Meddling With Markets

Producers may supply a good with inefficiently high quality if the government imposes:

Suppose the Jamaican government sets coffee prices at $1 per pound, when the market price is $10. The government's actions will:

Use the following to answer questions: Table: Market for Apartments -(Table: Market for Apartments) Look at the table Market for Apartments. If a price ceiling of $900 is imposed on this market, the result will be an inefficiency in the form of a _____ million apartments.

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

Price ceilings will impose costs on society because they:

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

Suppose the United States removes the sugar quotas and the market price of sugar drops. Since sugar is an input in candy, in the candy bar market, we would expect consumer surplus to:

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

A binding price floor causes:

A binding price ceiling is designed to:

Price controls:

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent0:

If New York City had no medallion system for taxicabs, assuming that the supply curve of taxicab rides is upward-sloping and the demand curve for taxicab rides is downward-sloping, the price of a taxicab ride would:

Use the following to answer questions: Figure: Price Controls -(Figure: Price Controls) Look at the graph Price Controls. The consumer surplus lost to a price floor at point b is equal to the area:

Use the following to answer questions: Figure: The Market for Economics Textbooks -(Figure: The Market for Economics Textbooks) Look at the figure The Market for Economics Textbooks. At a price ceiling of $40, the market outcome would be a _____ of _____ textbooks.

Quotas, price ceilings, and price floors are all types of quantity controls that the government may impose.

Use the following to answer questions: Figure: The Market for Hybrid Cars -(Figure: The 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?

Use the following to answer questions: Figure: Supply and Demand in Agriculture -(Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in Agriculture. The government could help increase farmers' income by setting a price _____ at _____, causing a _____ of _____.

Black markets may develop as a result of price controls because:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Use the following to answer questions: Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent₀:

Use the following to answer questions: Figure: The Market for Economics Textbooks -(Figure: The Market for Economics Textbooks) Look at the figure The Market for Economics Textbooks. At a price ceiling of $40, the market outcome would be a _ of _ textbooks.

Use the following to answer questions: Figure: The Market for Hybrid Cars -(Figure: The 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?

Use the following to answer questions: Figure: Supply and Demand in Agriculture -(Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in Agriculture. The government could help increase farmers' income by setting a price ___ at _, causing a _ of ___.