Question 1

Rent controls usually set a ceiling below the equilibrium price, and therefore:

Accepted Answer

A)  quantity supplied exceeds the quantity demanded. 
B)  quantity demanded exceeds the quantity supplied. 
C)  a surplus of rental units will result. 
D)  all low-income recipients will clearly be helped. 
A)  quantity supplied exceeds the quantity demanded. 
B)  quantity demanded exceeds the quantity supplied. 
C)  a surplus of rental units will result. 
D)  all low-income recipients will clearly be helped.

Question 2

Which of the following is an example of a black market transaction?

Accepted Answer

A)  a tenant in a rent-controlled apartment subletting at a higher rent 
B)  the purchase of an inferior radio at a department store 
C)  waiting in line during the gasoline shortages of the 1970s 
D)  the oil market 
A)  a tenant in a rent-controlled apartment subletting at a higher rent 
B)  the purchase of an inferior radio at a department store 
C)  waiting in line during the gasoline shortages of the 1970s 
D)  the oil market

Question 3

Use the following to answer questions 
Figure: Supply and Demand  
-(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P1 causes:

Accepted Answer

A)  a shortage equal to the distance AB. 
B)  a surplus equal to the distance AB. 
C)  a shortage equal to the distance DE. 
D)  no change to the market. 
A)  a shortage equal to the distance AB. 
B)  a surplus equal to the distance AB. 
C)  a shortage equal to the distance DE. 
D)  no change to the market.

Question 4

Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States:

Accepted Answer

A)  lead to agricultural surpluses and lower prices for farmers in developing countries. 
B)  raise the world price of agricultural products. 
C)  have led to a global shortage of agricultural products. 
D)  have led to an increase in the demand for agricultural products from the developing world. 
A)  lead to agricultural surpluses and lower prices for farmers in developing countries. 
B)  raise the world price of agricultural products. 
C)  have led to a global shortage of agricultural products. 
D)  have led to an increase in the demand for agricultural products from the developing world.

Question 5

Use the following to answer question 
Figure: The Market for Milk  
-(Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

Accepted Answer

A)  P1; Q1; Q3 
B)  P2; Q2; Q2 
C)  P1; Q3; Q1 
D)  P3; Q3; Q1 
A)  P1; Q1; Q3 
B)  P2; Q2; Q2 
C)  P1; Q3; Q1 
D)  P3; Q3; Q1

Question 6

A student organization is formed on your college campus to protest against the high rent for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for?

Accepted Answer

A)  a laissez faire policy 
B)  a price floor 
C)  a price ceiling 
D)  a quantity control 
A)  a laissez faire policy 
B)  a price floor 
C)  a price ceiling 
D)  a quantity control

Question 7

When price controls take the form of maximum prices set below the equilibrium price, they are:

Accepted Answer

A)  illegal. 
B)  equal to the demand price. 
C)  price floors. 
D)  price ceilings. 
A)  illegal. 
B)  equal to the demand price. 
C)  price floors. 
D)  price ceilings.

Question 8

If government decides to control the amount of a good allowed into a market, this will:

Accepted Answer

A)  always result in an increase in efficiency in the market. 
B)  increase incentives for market participants to engage in black market activities. 
C)  result in the equilibrium quantity being produced if the quota is binding. 
D)  lead to more of the good being produced. 
A)  always result in an increase in efficiency in the market. 
B)  increase incentives for market participants to engage in black market activities. 
C)  result in the equilibrium quantity being produced if the quota is binding. 
D)  lead to more of the good being produced.

Question 9

The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all of its tickets at $25. However, outside Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the concertgoer of a ticket to the symphony is at least:

Accepted Answer

A)  $25. 
B)  $50. 
C)  $75. 
D)  $100. 
A)  $25. 
B)  $50. 
C)  $75. 
D)  $100.

Question 10

Suppose Congress imposes a price ceiling of $5 per ATM transaction. If the average market-clearing price for an ATM transaction is $2, the price ceiling will not be binding in this instance.

Accepted Answer

A) True 
 B)False

Question 11

Economists in general agree that rent controls are:

Accepted Answer

A)  an efficient and equitable way to help low-income families. 
B)  an inefficient but sometimes effective way to help low-income families. 
C)  an efficient method of dealing with the shortages caused by price ceilings. 
D)  the only way to solve the problem of poverty. 
A)  an efficient and equitable way to help low-income families. 
B)  an inefficient but sometimes effective way to help low-income families. 
C)  an efficient method of dealing with the shortages caused by price ceilings. 
D)  the only way to solve the problem of poverty.

Question 12

An effective price floor would result in:

Accepted Answer

A)  a surplus of the good. 
B)  a shortage of the good. 
C)  a quantity control. 
D)  an equilibrium price. 
A)  a surplus of the good. 
B)  a shortage of the good. 
C)  a quantity control. 
D)  an equilibrium price.

Question 13

In New York City there are more than 100,000 licensed taxicabs.

Accepted Answer

A) True 
 B)False

Question 14

A price ceiling will have NO effect if:

Accepted Answer

A)  it is set above the equilibrium price. 
B)  the equilibrium price is above the price ceiling. 
C)  it is set below the equilibrium price. 
D)  it creates a shortage. 
A)  it is set above the equilibrium price. 
B)  the equilibrium price is above the price ceiling. 
C)  it is set below the equilibrium price. 
D)  it creates a shortage.

Question 15

Use the following to answer questions 
Figure: Supply and Demand  
-(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P3 causes:

Accepted Answer

A)  a shortage equal to the distance AB. 
B)  a surplus equal to the distance AB. 
C)  a shortage equal to the distance DE. 
D)  no change to the market. 
A)  a shortage equal to the distance AB. 
B)  a surplus equal to the distance AB. 
C)  a shortage equal to the distance DE. 
D)  no change to the market.

Question 16

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 17

Which of the following is a likely outcome of price controls and quota limits?

Accepted Answer

A)  prices higher than the market equilibrium price 
B)  illegal activity as people invent ways to get around the market constraint 
C)  shortages and units of output that must be disposed of 
D)  shortages and inefficiency caused by buyers searching for units of the good 
A)  prices higher than the market equilibrium price 
B)  illegal activity as people invent ways to get around the market constraint 
C)  shortages and units of output that must be disposed of 
D)  shortages and inefficiency caused by buyers searching for units of the good

Question 18

In Europe the minimum wage has led to:

Accepted Answer

A)  lower unemployment, especially among young workers. 
B)  a proliferation of large companies in Italy. 
C)  widespread evasion of the minimum wage law in the black market for labor. 
D)  European governments hiring the surplus of workers. 
A)  lower unemployment, especially among young workers. 
B)  a proliferation of large companies in Italy. 
C)  widespread evasion of the minimum wage law in the black market for labor. 
D)  European governments hiring the surplus of workers.

Question 19

A price control is:

Accepted Answer

A)  control of the price of a good by the firm that produces it. 
B)  a legal restriction on how high or low a price in a market may go. 
C)  an upper limit on the quantity of some good that can be bought or sold. 
D)  a tax on the sale of a good that controls the market price. 
A)  control of the price of a good by the firm that produces it. 
B)  a legal restriction on how high or low a price in a market may go. 
C)  an upper limit on the quantity of some good that can be bought or sold. 
D)  a tax on the sale of a good that controls the market price.

Question 20

The most likely reason that the government would implement a _____ is because it feels that the price is too low for _____.

Accepted Answer

A)  price ceiling; consumers 
B)  price floor; consumers 
C)  price ceiling; producers 
D)  price floor; producers 
A)  price ceiling; consumers 
B)  price floor; consumers 
C)  price ceiling; producers 
D)  price floor; producers

Exam 5: Price Controls and Quotas- Meddling With Markets

Rent controls usually set a ceiling below the equilibrium price, and therefore:

Which of the following is an example of a black market transaction?

Use the following to answer questions Figure: Supply and Demand -(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P1 causes:

Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States:

Use the following to answer question Figure: The Market for Milk -(Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

A student organization is formed on your college campus to protest against the high rent for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for?

When price controls take the form of maximum prices set below the equilibrium price, they are:

If government decides to control the amount of a good allowed into a market, this will:

Suppose Congress imposes a price ceiling of $5 per ATM transaction. If the average market-clearing price for an ATM transaction is $2, the price ceiling will not be binding in this instance.

Economists in general agree that rent controls are:

An effective price floor would result in:

In New York City there are more than 100,000 licensed taxicabs.

A price ceiling will have NO effect if:

Use the following to answer questions Figure: Supply and Demand -(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P3 causes:

Price controls:

Which of the following is a likely outcome of price controls and quota limits?

In Europe the minimum wage has led to:

A price control is:

The most likely reason that the government would implement a _____ is because it feels that the price is too low for _____.

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: Supply and Demand -(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P₁causes:

Use the following to answer question Figure: The Market for Milk -(Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding price floor, the price could be equal to ___, consumers would demand _, and producers would supply ___.

Use the following to answer questions Figure: Supply and Demand -(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P₃ causes:

The most likely reason that the government would implement a _ is because it feels that the price is too low for _.