Exam 5: Price Controls and Quotas- Meddling With Markets

Use the following to answer questions Figure: Price Controls -(Figure: Price Controls) Look at the graph Price Controls. A price floor has been set at point b. The area of deadweight loss that results from this price floor is:

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be:

If the government imposes binding rent control:

One of the consequences of the minimum wage has been:

An increase in producer surplus would most likely occur if:

A binding rent-control price ceiling results in all of the following EXCEPT:

Use the following to answer question Figure: The Market for Hybrid Cars -(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. If there were a binding price ceiling in the market for hybrid cars, one possible price would be equal to _____; consumers would demand _____; and producers would supply _____.

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:

If the government imposes a limit on sales of a good or service by licensing the right to sell a given quantity of the good, the difference between the demand and supply price is:

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

A price ceiling is likely to result in a persistent _____, a transfer of surplus from _____, and _____ deadweight loss.

When the government removes a binding price floor:

Use the following to answer question Figure: The Market for English Textbooks -(Figure: The Market for English Textbooks) Look at the figure The Market for English Textbooks. With a binding price floor at $90, the market outcome would be a _____ of _____ textbooks.

Price controls are always set below the market equilibrium price.

The quota rent is:

Use the following to answer questions : -(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. A price floor equal to _____ would produce excess supply in this market.

A price ceiling is not effective if:

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

A price floor is likely to cause deadweight loss because:

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If it imposes the price ceiling above the equilibrium price: