Question 1

Quota limits that are less than the market equilibrium quantity cause:

Accepted Answer

A)  the demand price to be above the supply price. 
B)  the quantity demanded to be more than the quantity supplied. 
C)  the quantity demanded to be less than the quantity supplied. 
D)  the demand price to be equal to the supply price. 
A)  the demand price to be above the supply price. 
B)  the quantity demanded to be more than the quantity supplied. 
C)  the quantity demanded to be less than the quantity supplied. 
D)  the demand price to be equal to the supply price.

Question 2

The Canadian Medical Association licenses doctors.This licensing has probably led to lower earnings for doctors over time.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer question 148:  
-(Figure: Quantity Controls)Use Figure: Quantity Controls.If the government decides to restrict the quantity sold to 100,which statement is FALSE?

Accepted Answer

A)  Total surplus will fall by areas C and E. 
B)  The market is not at the free-market equilibrium. 
C)  Consumer surplus is maximized. 
D)  Some mutually beneficial transactions have been eliminated. 
A)  Total surplus will fall by areas C and E. 
B)  The market is not at the free-market equilibrium. 
C)  Consumer surplus is maximized. 
D)  Some mutually beneficial transactions have been eliminated.

Question 4

When the government removes a binding price floor:

Accepted Answer

A)  quantity demanded will decrease and quantity supplied will increase. 
B)  quantity demanded will increase and quantity supplied will decrease. 
C)  excess demand will develop. 
D)  excess supply will develop. 
A)  quantity demanded will decrease and quantity supplied will increase. 
B)  quantity demanded will increase and quantity supplied will decrease. 
C)  excess demand will develop. 
D)  excess supply will develop.

Question 5

A price ceiling benefits all consumers.

Accepted Answer

A) True 
 B)False

Question 6

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers.If this happened,the quality of drugs would improve.

Accepted Answer

A) True 
 B)False

Question 7

The most likely reason that the government implements a price _____ is because it feels the price is too high for _____.

Accepted Answer

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

Question 8

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Market for Apartments }\
\begin{array} { c c c } 
\begin{array} { c } 
\text { Rent } \
\text { (per apartment } \
\text { per month) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (millions of apartments) }
\end{array} & \begin{array} { c } 
\text { Quantity Supplied } \
\text { (millions of apartments) }
\end{array} \
\hline \$ 1400 & 1.6 & 2.4 \
1300 & 1.7 & 2.3 \
1200 & 1.8 & 2.2 \
1100 & 1.9 & 2.1 \
1000 & 2.0 & 2.0 \
900 & 2.1 & 1.9 \
800 & 2.2 & 1.8 \
700 & 2.3 & 1.7 \
600 & 2.4 & 1.6 \
\hline
\end{array}
\end{array}$$
-(Table: Market for Apartments)Use Table: Market for Apartments.If a government price ceiling of $600 is imposed on this market,the result will be an inefficiency in the form of a _____ million apartments.

Accepted Answer

A)  surplus of 0.6 
B)  surplus of 0.8 
C)  shortage of 0.8 
D)  shortage of 0.6 
A)  surplus of 0.6 
B)  surplus of 0.8 
C)  shortage of 0.8 
D)  shortage of 0.6

Question 9

A binding price floor causes:

Accepted Answer

A)  a shortage in the market. 
B)  a surplus in the market. 
C)  an efficient use of resources. 
D)  equilibrium. 
A)  a shortage in the market. 
B)  a surplus in the market. 
C)  an efficient use of resources. 
D)  equilibrium.

Question 10

The dictator of a small country restricts the price of cars to an amount less than or equal to $1 200 (a price below the equilibrium price for cars).Such a policy would set a:

Accepted Answer

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

Question 11

Price ceilings will impose costs on society because they:

Accepted Answer

A)  will eliminate long waiting lines. 
B)  may result in black markets,where prices are lower than the market-determined price would be. 
C)  lead to a smaller quantity offered on the market. 
D)  help businesses instead of consumers. 
A)  will eliminate long waiting lines. 
B)  may result in black markets,where prices are lower than the market-determined price would be. 
C)  lead to a smaller quantity offered on the market. 
D)  help businesses instead of consumers.

Question 12

Farmers in developing countries want Canada to reduce the subsidies that it gives to Canadian farmers because subsidized agricultural products from Canada:

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 13

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 licence is equal to the:

Accepted Answer

A)  demand price of the good. 
B)  wedge that represents the difference between the demand price and the supply price. 
C)  supply price of the good. 
D)  equilibrium price of the good. 
A)  demand price of the good. 
B)  wedge that represents the difference between the demand price and the supply price. 
C)  supply price of the good. 
D)  equilibrium price of the good.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions : $$\begin{array}{l}
\text { Table: The Market for Banana Muffins }\
\begin{array} { c c c } 
\hline & { \text { Market for Banana Muffins } } \
 \text { Price } & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Supplied } \
\text { (units) }
\end{array} \
\hline \$ 1.10 & 9000 & 3000 \
1.20 & 8000 & 5000 \
1.30 & 7000 & 7000 \
1.40 & 6000 & 9000 \
1.50 & 5000 & 1100
\end{array}
\end{array}$$
-(Table: Market for Banana Muffins)Use Table: Market for Banana Muffins.Suppose that the government decides to reduce banana muffin consumption as part of a war on obesity.After careful study,the government decides to impose a quota of 5 000 on production of banana muffins 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 16

When the minimum wage increases,which outcome is MOST likely?

Accepted Answer

A)  Unemployment among skilled workers decreases. 
B)  Fewer workers are willing to work off the books. 
C)  Skilled workers will outnumber unskilled workers. 
D)  Unemployment among unskilled workers increases. 
A)  Unemployment among skilled workers decreases. 
B)  Fewer workers are willing to work off the books. 
C)  Skilled workers will outnumber unskilled workers. 
D)  Unemployment among unskilled workers increases.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

A binding price ceiling results in:

Accepted Answer

A)  inefficiency resulting from overproduction of the good. 
B)  inefficiency because transactions are held below the equilibrium quantity. 
C)  a decrease in wasted resources,as consumers find such goods more easily. 
D)  surpluses in the market,which eventually lead to inefficient production costs. 
A)  inefficiency resulting from overproduction of the good. 
B)  inefficiency because transactions are held below the equilibrium quantity. 
C)  a decrease in wasted resources,as consumers find such goods more easily. 
D)  surpluses in the market,which eventually lead to inefficient production costs.

Question 20

If government decides to control the amount of a good allowed to be transacted in 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.

Exam 5: Price Controls and Quotas

Quota limits that are less than the market equilibrium quantity cause:

The Canadian Medical Association licenses doctors.This licensing has probably led to lower earnings for doctors over time.

Use the following to answer question 148: -(Figure: Quantity Controls)Use Figure: Quantity Controls.If the government decides to restrict the quantity sold to 100,which statement is FALSE?

When the government removes a binding price floor:

A price ceiling benefits all consumers.

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers.If this happened,the quality of drugs would improve.

The most likely reason that the government implements a price _____ is because it feels the price is too high for _____.

A binding price floor causes:

The dictator of a small country restricts the price of cars to an amount less than or equal to $1 200 (a price below the equilibrium price for cars).Such a policy would set a:

Price ceilings will impose costs on society because they:

Farmers in developing countries want Canada to reduce the subsidies that it gives to Canadian farmers because subsidized agricultural products from Canada:

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 licence is equal to the:

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

When the minimum wage increases,which outcome is MOST likely?

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

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

A binding price ceiling results in:

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

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

The most likely reason that the government implements a price _ is because it feels the price is too high for _.