Question 1

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:

Accepted Answer

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. 
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.

Question 2

Use the following to answer questions:  
-(Table: Market for Fried Twinkies) Look at the table Market for Fried Twinkies. Suppose the government decides to reduce fried Twinkie consumption as part of a war on obesity. After careful study, the government decides to impose a quota of 5,000 on production of fried Twinkies this year. What price will producers charge if they obey the quota law?

Accepted Answer

A)  $1.20 
B)  $1.30 
C)  $1.50 
D)  The answer cannot be determined with this information. 
A)  $1.20 
B)  $1.30 
C)  $1.50 
D)  The answer cannot be determined with this information.

Question 3

An increase in producer surplus would most likely occur if:

Accepted Answer

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. 
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.

Question 4

Quantity controls set below the equilibrium quantity cause all of the following EXCEPT:

Accepted Answer

A)  incentives for illegal activities. 
B)  missed opportunities in the form of mutually beneficial transactions that don't occur. 
C)  the supply price of the quantity transacted exceeding the demand price of the quantity transacted. 
D)  quota rents. 
A)  incentives for illegal activities. 
B)  missed opportunities in the form of mutually beneficial transactions that don't occur. 
C)  the supply price of the quantity transacted exceeding the demand price of the quantity transacted. 
D)  quota rents.

Question 5

A minimum price that the government guarantees farmers will receive for a particular crop is:

Accepted Answer

A)  a price ceiling. 
B)  a price floor (price support). 
C)  a deficiency price. 
D)  an export price (export subsidy). 
A)  a price ceiling. 
B)  a price floor (price support). 
C)  a deficiency price. 
D)  an export price (export subsidy).

Question 6

Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed:

Accepted Answer

A)  the quantity demanded will decrease and the quantity supplied will increase. 
B)  excess demand will develop. 
C)  the quality of the good supplied will decrease. 
D)  the quality of the good supplied will improve. 
A)  the quantity demanded will decrease and the quantity supplied will increase. 
B)  excess demand will develop. 
C)  the quality of the good supplied will decrease. 
D)  the quality of the good supplied will improve.

Question 7

One of the ways rent control is inefficient is that it leads to:

Accepted Answer

A)  higher-quality apartments. 
B)  high opportunity costs associated with wasted time searching for apartments. 
C)  markets that maximize total surplus. 
D)  the construction of more apartments. 
A)  higher-quality apartments. 
B)  high opportunity costs associated with wasted time searching for apartments. 
C)  markets that maximize total surplus. 
D)  the construction of more apartments.

Question 8

A quota is:

Accepted Answer

A)  a lower limit on quantity. 
B)  an upper limit on quantity. 
C)  a maximum price. 
D)  a minimum price. 
A)  a lower limit on quantity. 
B)  an upper limit on quantity. 
C)  a maximum price. 
D)  a minimum price.

Question 9

Although they cost more than $200,000 when they were issued in the 1930s, the New York taxicab medallions are relatively inexpensive today, selling for around $3,000.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions:  
-(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda demanded will be:

Accepted Answer

A)  10 cans. 
B)  8 cans. 
C)  6 cans. 
D)  4 cans. 
A)  10 cans. 
B)  8 cans. 
C)  6 cans. 
D)  4 cans.

Question 11

By definition, in a black market, goods or services are bought and sold:

Accepted Answer

A)  at night. 
B)  without any information about quality. 
C)  without any information about price. 
D)  illegally. 
A)  at night. 
B)  without any information about quality. 
C)  without any information about price. 
D)  illegally.

Question 12

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

Accepted Answer

A)  a price control. 
B)  an excise tax. 
C)  a binding price floor. 
D)  a binding price ceiling. 
A)  a price control. 
B)  an excise tax. 
C)  a binding price floor. 
D)  a binding price ceiling.

Question 13

To be binding, a price floor must be set:

Accepted Answer

A)  lower than the equilibrium price. 
B)  higher than the equilibrium price. 
C)  so that quantity demanded exceeds quantity supplied. 
D)  lower than the equilibrium price and so that quantity demanded exceeds quantity supplied. 
A)  lower than the equilibrium price. 
B)  higher than the equilibrium price. 
C)  so that quantity demanded exceeds quantity supplied. 
D)  lower than the equilibrium price and so that quantity demanded exceeds quantity supplied.

Question 14

The quota rent is the result of a supply price that is above the demand price.

Accepted Answer

A) True 
 B)False

Question 15

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

Accepted Answer

A) True 
 B)False

Question 16

The system of taxicab medallions in New York City is an example of a:

Accepted Answer

A)  price ceiling. 
B)  nonbinding price ceiling. 
C)  price floor. 
D)  quantity control. 
A)  price ceiling. 
B)  nonbinding price ceiling. 
C)  price floor. 
D)  quantity control.

Question 17

Which of the following is a quota?

Accepted Answer

A)  rent controls in New York City 
B)  property taxes on beachfront property in Florida 
C)  limits on the number of bushels of clams that can be caught in New Jersey 
D)  the maximum reimbursement that insurance will pay for a medical procedure 
A)  rent controls in New York City 
B)  property taxes on beachfront property in Florida 
C)  limits on the number of bushels of clams that can be caught in New Jersey 
D)  the maximum reimbursement that insurance will pay for a medical procedure

Question 18

The difference between the demand price and the supply price at the quota limit is:

Accepted Answer

A)  the quota rent. 
B)  the rent received by landlords who own rent-controlled apartments. 
C)  the opportunity cost of using or buying a good, subject to an import quota. 
D)  usually large enough to cause a surplus. 
A)  the quota rent. 
B)  the rent received by landlords who own rent-controlled apartments. 
C)  the opportunity cost of using or buying a good, subject to an import quota. 
D)  usually large enough to cause a surplus.

Question 19

An upper limit on the quantity of a good that can be bought and sold is a:

Accepted Answer

A)  quota limit. 
B)  price ceiling. 
C)  price floor. 
D)  tariff. 
A)  quota limit. 
B)  price ceiling. 
C)  price floor. 
D)  tariff.

Question 20

When the government imposes a quota on sales of a good or service, it usually licenses the right to sell a given quantity of the good. The market price of the license is equal to:

Accepted Answer

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 plus the wedge that represents the difference between the demand price and the supply price. 
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 plus the wedge that represents the difference between the demand price and the supply price.

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:

An increase in producer surplus would most likely occur if:

Quantity controls set below the equilibrium quantity cause all of the following EXCEPT:

A minimum price that the government guarantees farmers will receive for a particular crop is:

Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed:

One of the ways rent control is inefficient is that it leads to:

A quota is:

Although they cost more than $200,000 when they were issued in the 1930s, the New York taxicab medallions are relatively inexpensive today, selling for around $3,000.

Use the following to answer questions: -(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda demanded will be:

By definition, in a black market, goods or services are bought and sold:

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

To be binding, a price floor must be set:

The quota rent is the result of a supply price that is above the demand price.

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

The system of taxicab medallions in New York City is an example of a:

Which of the following is a quota?

The difference between the demand price and the supply price at the quota limit is:

An upper limit on the quantity of a good that can be bought and sold is a:

When the government imposes a quota on sales of a good or service, it usually licenses the right to sell a given quantity of the good. The market price of the license is equal to:

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

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:

An increase in producer surplus would most likely occur if:

Quantity controls set below the equilibrium quantity cause all of the following EXCEPT:

A minimum price that the government guarantees farmers will receive for a particular crop is:

Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed:

One of the ways rent control is inefficient is that it leads to:

A quota is:

Although they cost more than $200,000 when they were issued in the 1930s, the New York taxicab medallions are relatively inexpensive today, selling for around $3,000.

Use the following to answer questions: -(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda demanded will be:

By definition, in a black market, goods or services are bought and sold:

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

To be binding, a price floor must be set:

The quota rent is the result of a supply price that is above the demand price.

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

The system of taxicab medallions in New York City is an example of a:

Which of the following is a quota?

The difference between the demand price and the supply price at the quota limit is:

An upper limit on the quantity of a good that can be bought and sold is a:

When the government imposes a quota on sales of a good or service, it usually licenses the right to sell a given quantity of the good. The market price of the license is equal to:

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