Question 1

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 2

A maximum price legislated by the government is called:

Accepted Answer

A)  a price support. 
B)  a price floor. 
C)  a price ceiling. 
D)  the parity price. 
A)  a price support. 
B)  a price floor. 
C)  a price ceiling. 
D)  the parity price.

Question 3

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. Suppose the government believes textbooks are too expensive and it wants to make sure textbooks are affordable to more students. This type of price control is called a price _____, and one possible binding price control would be _____.

Accepted Answer

A)  floor; $100 
B)  floor; $40 
C)  ceiling; $40 
D)  ceiling; $100 
A)  floor; $100 
B)  floor; $40 
C)  ceiling; $40 
D)  ceiling; $100

Question 4

A price ceiling on a good often results in:

Accepted Answer

A)  black market or underground transactions of the good. 
B)  a surplus of the product. 
C)  more communication between buyers and sellers about the appropriate price. 
D)  a more efficient allocation of the good to buyers. 
A)  black market or underground transactions of the good. 
B)  a surplus of the product. 
C)  more communication between buyers and sellers about the appropriate price. 
D)  a more efficient allocation of the good to buyers.

Question 5

The government might impose a price floor if _____ can make a strong moral or political argument for _____ prices.

Accepted Answer

A)  demanders; lower 
B)  suppliers; lower 
C)  demanders; higher 
D)  suppliers; higher 
A)  demanders; lower 
B)  suppliers; lower 
C)  demanders; higher 
D)  suppliers; higher

Question 6

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 $0.50 per can of soda, there will be:

Accepted Answer

A)  a shortage of two cans. 
B)  a shortage of three cans. 
C)  a surplus of three cans. 
D)  equilibrium in the market for soda. 
A)  a shortage of two cans. 
B)  a shortage of three cans. 
C)  a surplus of three cans. 
D)  equilibrium in the market for soda.

Question 7

Which of the following is a quantity control?

Accepted Answer

A)  the Medicare reimbursement schedule for physicians 
B)  the minimum wage 
C)  unemployment insurance 
D)  limits on the number of red snappers that can be caught in the Gulf of Mexico 
A)  the Medicare reimbursement schedule for physicians 
B)  the minimum wage 
C)  unemployment insurance 
D)  limits on the number of red snappers that can be caught in the Gulf of Mexico

Question 8

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

Accepted Answer

A) True 
 B)False

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

The quota rent for a New York taxicab owner is equal to the market price of the license that allows him to drive the cab.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will:

Accepted Answer

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

Question 12

Use the following to answer questions 
Figure: Market I  
-(Figure: Market I) Look at the figure Market I. A surplus of the good will result if the price is:

Accepted Answer

A)  $15. 
B)  $9. 
C)  $6. 
D)  $0. 
A)  $15. 
B)  $9. 
C)  $6. 
D)  $0.

Question 13

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 $0.50 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 14

Quotas often:

Accepted Answer

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)  lead to efficient market outcomes. 
D)  are necessary to increase the quantity of the goods in the market. 
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)  lead to efficient market outcomes. 
D)  are necessary to increase the quantity of the goods in the market.

Question 15

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

Accepted Answer

A)  a shortage of two cans. 
B)  a shortage of three cans. 
C)  a surplus of three cans. 
D)  equilibrium in the market for soda. 
A)  a shortage of two cans. 
B)  a shortage of three cans. 
C)  a surplus of three cans. 
D)  equilibrium in the market for soda.

Question 16

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.

Question 17

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What will happen?

Accepted Answer

A)  More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price. 
B)  The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price. 
C)  More people will be able to see the doctor, since the price is lower. 
D)  Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price. 
A)  More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price. 
B)  The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price. 
C)  More people will be able to see the doctor, since the price is lower. 
D)  Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price.

Question 18

Which is NOT an inefficiency caused by price floors?

Accepted Answer

A)  inefficiently low quality 
B)  inefficient allocation of sales among sellers 
C)  wasted resources 
D)  illegal activity 
A)  inefficiently low quality 
B)  inefficient allocation of sales among sellers 
C)  wasted resources 
D)  illegal activity

Question 19

Use the following to answer question :  
-(Table: Market for Butter) Look at the table Market for Butter. If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be:

Accepted Answer

A)  10.5 million pounds. 
B)  9.0 million pounds. 
C)  1.5 million pounds. 
D)  10.0 million pounds. 
A)  10.5 million pounds. 
B)  9.0 million pounds. 
C)  1.5 million pounds. 
D)  10.0 million pounds.

Question 20

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.

Exam 5: Price Controls and Quotas- Meddling With Markets

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

A maximum price legislated by the government is called:

A price ceiling on a good often results in:

The government might impose a price floor if _____ can make a strong moral or political argument for _____ prices.

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 $0.50 per can of soda, there will be:

Which of the following is a quantity control?

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

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.

The quota rent for a New York taxicab owner is equal to the market price of the license that allows him to drive the cab.

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will:

Use the following to answer questions Figure: Market I -(Figure: Market I) Look at the figure Market I. A surplus of the good will result if the price is:

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 $0.50 per can of soda, the quantity of soda demanded will be:

Quotas often:

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

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:

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What will happen?

Which is NOT an inefficiency caused by price floors?

Use the following to answer question : -(Table: Market for Butter) Look at the table Market for Butter. If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be:

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:

First Principles

Economic Models- Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Elasticity

Taxes

The Rational Consumer

International Trade

Decision Making by Individuals and Firms

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Macroeconomics- the Big Picture

Gdp and the Consumer Price Index

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Macroeconomics- Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

Toward a Fuller Understanding

Consumer Preferences and Consumer Choice

Indifference Curve Analysis of Labor Supply

Filters

The government might impose a price floor if _ can make a strong moral or political argument for _ prices.