Question 1

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 2

Quantity controls are usually in the form of price ceilings or price floors established by the government.

Accepted Answer

A) True 
 B)False

Question 3

The minimum wage, which sets a lower limit on the wages that workers can earn, is often above the equilibrium price. The minimum wage is an example of:

Accepted Answer

A)  a price floor. 
B)  a price ceiling. 
C)  a quota. 
D)  an equilibrium price. 
A)  a price floor. 
B)  a price ceiling. 
C)  a quota. 
D)  an equilibrium price.

Question 4

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 consumer surplus if there is a binding price floor at P1?

Accepted Answer

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

Question 5

To be binding, a price ceiling must be set at a price:

Accepted Answer

A)  lower than the equilibrium price. 
B)  higher than the equilibrium price. 
C)  the same as the equilibrium price. 
D)  Any price ceiling is binding. 
A)  lower than the equilibrium price. 
B)  higher than the equilibrium price. 
C)  the same as the equilibrium price. 
D)  Any price ceiling is binding.

Question 6

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions  
-(Table: The Market for Soda) Look at the table The Market for Soda. If the government does not impose a price control, the price of a can of soda will equal:

Accepted Answer

A)  $0.50. 
B)  $0.75. 
C)  $1.00. 
D)  $1.25. 
A)  $0.50. 
B)  $0.75. 
C)  $1.00. 
D)  $1.25.

Question 8

An agricultural market price support policy establishes a binding price floor, which:

Accepted Answer

A)  decreases the price paid by consumers. 
B)  does not change the price paid by consumers. 
C)  increases the price received by farmers. 
D)  decreases the price received by farmers. 
A)  decreases the price paid by consumers. 
B)  does not change the price paid by consumers. 
C)  increases the price received by farmers. 
D)  decreases the price received by farmers.

Question 9

Use the following to answer question 
Figure: The Market for Spanish Textbooks  
-(Figure: The Market for Spanish Textbooks) Look at the figure The Market for Spanish Textbooks. Suppose the government believes the producers of Spanish textbooks are not profitable and it wants to make sure textbook producers are profitable. It could impose a control called a _____, and for it to be binding, one possible price would be _____.

Accepted Answer

A)  price floor; $90 
B)  price floor; $40 
C)  price ceiling; $40 
D)  price ceiling; $90 
A)  price floor; $90 
B)  price floor; $40 
C)  price ceiling; $40 
D)  price ceiling; $90

Question 10

Use the following to answer questions 
Figure: Market I  
-(Figure: Market I) Look at the figure Market I. A price floor at $15 would result in deadweight loss of:

Accepted Answer

A)  $9. 
B)  $10. 
C)  $20. 
D)  $40.50. 
A)  $9. 
B)  $10. 
C)  $20. 
D)  $40.50.

Question 11

Which of the following is an example of a price floor?

Accepted Answer

A)  a rent-controlled apartment 
B)  a maximum legal price that could be charged for gasoline during a time of war 
C)  the minimum wage 
D)  a government decree that capped the price of bottled water in the aftermath of a devastating hurricane 
A)  a rent-controlled apartment 
B)  a maximum legal price that could be charged for gasoline during a time of war 
C)  the minimum wage 
D)  a government decree that capped the price of bottled water in the aftermath of a devastating hurricane

Question 12

Use the following to answer questions 
Figure: Rent Controls  
-(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the equilibrium quantity is:

Accepted Answer

A)  Q4. 
B)  Q1. 
C)  Q2. 
D)  Q3. 
A)  Q4. 
B)  Q1. 
C)  Q2. 
D)  Q3.

Question 13

In the rental housing market with price controls, the quantity of rental houses demanded exceeds the quantity of rental housing supplied. This price control must be a:

Accepted Answer

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

Question 14

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 15

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 16

A price ceiling benefits all consumers.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

A limit on the amount of a foreign currency people are allowed to buy is an example of a quota.

Accepted Answer

A) True 
 B)False

Question 19

How do price ceilings cause black markets?

Accepted Answer

A price ceiling causes a shortage of the

Question 20

Which of the following is a reason for governments imposing or maintaining price controls?

Accepted Answer

A)  Some consumers and producers can benefit from price controls. 
B)  Price controls recapture the deadweight loss of equilibrium. 
C)  The government benefits from price controls. 
D)  Price controls improve the efficiency of the market. 
A)  Some consumers and producers can benefit from price controls. 
B)  Price controls recapture the deadweight loss of equilibrium. 
C)  The government benefits from price controls. 
D)  Price controls improve the efficiency of the market.

Exam 5: Price Controls and Quotas- Meddling With Markets

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

Quantity controls are usually in the form of price ceilings or price floors established by the government.

The minimum wage, which sets a lower limit on the wages that workers can earn, is often above the equilibrium price. The minimum wage is an example of:

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 consumer surplus if there is a binding price floor at P1?

To be binding, a price ceiling must be set at a price:

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

Use the following to answer questions -(Table: The Market for Soda) Look at the table The Market for Soda. If the government does not impose a price control, the price of a can of soda will equal:

An agricultural market price support policy establishes a binding price floor, which:

Use the following to answer questions Figure: Market I -(Figure: Market I) Look at the figure Market I. A price floor at $15 would result in deadweight loss of:

Which of the following is an example of a price floor?

Use the following to answer questions Figure: Rent Controls -(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the equilibrium quantity is:

In the rental housing market with price controls, the quantity of rental houses demanded exceeds the quantity of rental housing supplied. This price control must be a:

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:

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

A price ceiling benefits all consumers.

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

A limit on the amount of a foreign currency people are allowed to buy is an example of a quota.

How do price ceilings cause black markets?

Which of the following is a reason for governments imposing or maintaining price controls?

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

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 consumer surplus if there is a binding price floor at P₁?

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: