Deck 4: Price Controls

Question 1

Why are binding price ceiling laws passed?

A) They make goods more expensive (and profitable) for firms.
B) They encourage sellers to produce more of a good.
C) They encourage producers to sell higher-quality products.
D) They permit customers to obtain higher-quality products.
E) They make a good less expensive for those customers who are able to purchase the good in the legal market.

Answer 1

They make a good less expensive for those customers who are able to purchase the good in the legal market.

Question 2

Use the following information to answer the next two questions.
Market for used cars:
Demand: Qd = 154,000 - 86 P
Supply: Qs = -100 + 14 P
What would be the quantity demanded if a price ceiling is set at $1,000?

A) 500
B) 54,100
C) 68,000
D) 13,900
E) 21,474

Answer 2

68,000

Question 3

Which of the following is an accurate statement about the consequence of a binding price ceiling?

A) Binding price ceilings do not allow consumers to pay a lower price for the product in the legal market.
B) Binding price ceilings encourage the formation of a black market.
C) Binding price ceilings discourage the formation of a black market.
D) Binding price ceilings create a surplus of the product.
E) Binding price ceilings cause consumers to purchase more of the product in the legal market.

Answer 3

Binding price ceilings encourage the formation of a black market.

Question 4

What will happen in a market where a binding price ceiling is removed?

A) There will be downward pressure on the price in the legal market.
B) The products sold will improve in quality and become more plentiful.
C) Sellers will face a reduced incentive to sell the product.
D) Buyers will find the good more difficult to obtain in the legal market.
E) There will be increased pressure to buy and sell the good on the black market.

Question 5

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower.Such a law is an example of a(n):

A) equilibrium price.
B) price ceiling.
C) price floor.
D) black market price.
E) ration price.

Question 6

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families.The law that sets food prices low enough to meet these requirements would be an example of a:

A) minimum wage law.
B) fair wage law.
C) price ceiling.
D) black market price.
E) ration price.

Question 7

Use the following information to answer the next two questions.
Market for flat-screen TVs:
Demand: Q_d = 2,600 - 5 P
Supply: Q_s = -1,000 + 10 P
What would be the quantity demanded if a price ceiling is set at $150?

A) 500
B) 1,850
C) 240
D) 1,350
E) 260

Question 8

Why does a surplus exist under a binding price floor?

A) It encourages sellers to produce less of the product.
B) It encourages buyers to purchase more of the product.
C) It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.
E) It discourages sellers from increasing the quality of the product they sell, which, in turn, increases the quantity demanded.

Question 9

Mortimer loves sushi.He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law.Who would be affected by this law and how?

A) Sellers would benefit from such a law because they would receive a higher price for their product.
B) Consumers would benefit from such a law because prices would be lower and all would be able to purchase sushi cheaply.
C) Consumers would benefit from such a law because the sushi would be made of higher-quality fish, and each serving would be larger than it had been with no binding price ceiling in place.
D) Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.
E) Sellers would benefit from such a law because they would be able to sell higher-quality sushi and thus capture a larger share of the market.

Question 10

Use the following information to answer the next two questions.
Market for flat-screen TVs:
Demand: Q_d = 2,600 - 5 P
Supply: Q_s = -1,000 + 10 P
What would be the quantity demanded if a price ceiling is set at $400?

A) 600
B) 240
C) 0
D) 3,000
E) 2,400

Question 11

If a store sells a good at the market price,even though the government authorities have set the minimum price that can be charged,the store is selling the good in a(n):

A) black market for a market price that is higher.
B) black market for a market price that is lower.
C) effort to eliminate a surplus of the good.
D) legal market for a market price that is higher.
E) legal market for a market price that is lower.

Question 12

If a store sells a good at the market price,even though the government authorities have set the maximum price that can be charged for it,the store is selling the good in a(n):

A) black market for a market price that is higher.
B) black market for a market price that is lower.
C) effort to eliminate a surplus of the good.
D) legal market for a market price that is higher.
E) legal market for a market price that is lower.

Question 13

Do all buyers benefit from a binding price ceiling?

A) Yes.A binding price ceiling benefits all buyers because it allows them to obtain the good in the legal market.
B) No.A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal market.
C) No.A binding price ceiling benefits no buyers because sellers are unwilling to sell any of their products.
D) No.A binding price ceiling benefits only some buyers because, although the price is initially lower, it eventually increases to the equilibrium price.
E) No.A binding price ceiling benefits no buyers because they are unwilling to buy any of the products at a price higher than the equilibrium.

Question 14

If you were a politician,why would you find it difficult to remove a binding price ceiling?

A) because it greatly benefits firms, and they would spend a lot of money to lobby against the law's repeal
B) because it greatly benefits government, which receives additional tax revenue as a result
C) because it greatly benefits all consumers, and they are also voters
D) because it greatly benefits some consumers who are also voters
E) because it greatly benefits society as a whole, with all consumers able to buy as much as firms produce

Question 15

Use the following information to answer the next two questions.
Market for used cars:
Demand: Qd = 154,000 - 86 P
Supply: Qs = -100 + 14 P
What would be the quantity demanded if a price ceiling is set at $2,000?

A) 100
B) 154,100
C) 1,541
D) 21,474
E) 18,000

Question 16

Why do government leaders impose price controls?

A) They are trying to promote the formation of black markets.
B) They are trying to ensure that the market reaches equilibrium.
C) They are trying to ensure that all consumers are able to purchase a specific product.
D) They are trying to ensure that a social goal is satisfied.
E) They are trying to increase the demand curve.

Question 17

Why do shortages develop under a binding price ceiling?

A) It encourages sellers to produce more of the product.
B) It encourages buyers to purchase less of the product.
C) It makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market.
D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the black market.
E) It encourages sellers to increase the quality of the product they sell, which, in turn, increases the quantity demanded.

Question 18

What is a black market?

A) It is an illegal market that emerges when binding and nonbinding price controls are in place.
B) It is an illegal market that emerges when binding price ceilings are in place.
C) It is an illegal market that emerges when binding price floors are in place.
D) It is an illegal market that emerges when only binding price ceilings and binding price floors are in place.
E) It is an illegal market that emerges when no price controls are present.

Question 19

Use the following information to answer the next two questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
What would be the quantity demanded if a price ceiling is set at $20?

A) 90
B) 45
C) 265
D) 165
E) 305

Question 20

A binding price ceiling will have the following consequences:

A) There will be downward pressure on prices until quantity demanded equals quantity supplied.
B) There will be upward pressure on prices until quantity demanded equals quantity supplied.
C) There are no consequences to a binding price ceiling.
D) The quantity demanded will always exceed the quantity supplied.
E) The quantity demanded will always be smaller than the quantity supplied.

Question 21

Refer to the accompanying figure to answer the next two questions.

You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

A) binding price floor is high.
B) binding price floor is low.
C) nonbinding price ceiling is high.
D) binding price ceiling is low.
E) binding price ceiling is high.

Question 22

Refer to the accompanying figure to answer the next two questions.

If there is a $60 price ceiling imposed on a textbook,what will be the disequilibrium amount?

A) There will be a shortage of 800,000 textbooks.
B) There will be a surplus of 800,000 textbooks.
C) There will be neither a shortage nor a surplus.
D) There will be a shortage of 2,600,000 textbooks.
E) There will be a shortage of 400,000 textbooks.

Question 23

Refer to the accompanying figure to answer the next two questions.

The market is currently at market equilibrium.If a binding price ceiling of P₁ is imposed,by how much would the quantity supplied change?

A) It would increase by 32,000 units.
B) It would decrease by 18,000 units.
C) It would decrease by 30,500 units.
D) It would decrease by 30,000 units.
E) It would decrease by 32,000 units.

Question 24

Use the following table to answer the next three questions.

What would be the equilibrium price in the market for corn?

A) $2.00
B) $5.00
C) $4.00
D) $3.50
E) $4.50

Question 25

Use the following table to answer the next three questions.

What would be the equilibrium quantity in the market for corn?

A) 223,000
B) 3.50
C) 103,000
D) 200,000
E) 169,000

Question 26

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

A) Both the quality and the size of the product will decrease.
B) The quality of the product will increase but the size of the product will decrease.
C) Both the quality and the size of the product will increase.
D) The quality of the product will decrease but the size of the product will increase.
E) Neither the quality nor the size of the product will be affected.

Question 27

Refer to the accompanying figure to answer the next two questions.

What is the incentive to create a black market when a binding price floor exists?

A) A black market emerges because buyers are frustrated with shortages of the product.
B) A black market emerges because sellers have an incentive to charge a higher price on the illegal market.
C) A black market emerges because sellers want a market where they can sell higher-quality products.
D) A black market does not emerge; the price will eventually fall to the equilibrium price.
E) A black market emerges because sellers need a way to dispose of surplus product.

Question 28

Use the following information to answer the next two questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
Which of the following is an accurate statement about the consequence of nonbinding price ceilings?

A) They prevent the seller from receiving the equilibrium price.
B) They require the seller to advertise the product at the equilibrium price.
C) They create a surplus in the legal market.
D) They do not change the quantity of goods bought or sold in the legal market.
E) They increase the quantity demanded of the good in question.

Question 29

Refer to the accompanying figure to answer the next two questions.

What is the incentive to create a black market when a binding price ceiling exists?

A) A black market emerges because sellers have a surplus that they need to sell.
B) A black market emerges because sellers want a market where they can sell lower-quality products.
C) A black market emerges because sellers want a market where they can sell higher-quality products at higher prices.
D) A black market does not emerge because sellers are content to sell at the lower price.
E) A black market emerges because buyers who have a low opportunity cost are seeking out the product.

Question 30

Use the following information to answer the next two questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
What would be the quantity demanded if a price ceiling is set at $50?

A) 90
B) 35
C) 265
D) 165
E) 75

Question 31

Refer to the accompanying figure to answer the next two questions.

What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is $1.75?

A) 100,000
B) 86,000
C) 75,000
D) 40,000
E) 0 (zero)

Question 32

Refer to the accompanying figure to answer the next two questions.

The market is currently at market equilibrium.If a binding price ceiling of P₁ is imposed,by how much would the quantity demanded change?

A) It would increase by 12,000 units.
B) It would decrease by 30,500 units.
C) It would decrease by 12,000 units.
D) It would increase by 30,500 units.
E) It would increase by 30,000 units.

Question 33

If a good is subject to a binding price ceiling and you purchase it on the black market,what do you expect to happen to the price over time?

A) The black market price will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.
B) The black market price will fall over time as both the supply and demand curves become more inelastic.
C) The black market price will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.
D) The black market price will fall over time as both the supply and demand curves become more elastic.
E) The black market price will not change over time.

Question 34

Use the following table to answer the next three questions.

If the price ceiling for corn is $2.50,what amount and type of disequilibrium would be present in the market for corn?

A) There would be neither a shortage nor a surplus.
B) There would be a surplus of 61,000.
C) There would be a shortage of 61,000.
D) There would be a shortage of 186,000.
E) There would be a shortage of 125,000.

Question 35

Use the following information to answer the next two questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
Setting a price ceiling below the equilibrium price can result in:

A) a surplus, where the quantity demanded exceeds the quantity supplied.
B) a shortage, where the quantity demanded exceeds the quantity supplied.
C) a surplus, where the quantity supplied exceeds the quantity demanded.
D) a shortage, where the quantity supplied exceeds the quantity demanded.
E) no impact on the quantity demanded or on the quantity supplied.

Question 36

Refer to the accompanying figure to answer the next two questions.

If there is a $180 price ceiling imposed on a textbook,what will be the disequilibrium amount?

A) There will be a shortage of 1,500,000 units.
B) There will be a shortage of 800,000 units.
C) There will not be a shortage.
D) There will be a shortage of 3,000,000 units.
E) There will be a shortage of 450,000 units.

Question 37

Refer to the accompanying figure to answer the next two questions.

Why does a shortage that occurs under a binding price ceiling decrease over time?

A) Demand becomes more elastic.
B) Demand becomes more inelastic.
C) Demand and supply both become more elastic.
D) Demand and supply both become more inelastic.
E) Demand becomes more elastic, but supply becomes more inelastic.

Question 38

Refer to the accompanying figure to answer the next two questions.

Suppose you live in a community with no price controls.What do you expect will happen if your town borders a community where there is a nonbinding price ceiling on most products?

A) Legal market prices will rise in the community with a binding price ceiling.
B) Legal market prices will fall in the community with a binding price ceiling.
C) The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.
D) There will be more shortages in the community with a binding price ceiling.
E) The black market in the community with a binding price ceiling will not be strong because consumers will simply purchase the product in the community that has no price ceiling.

Question 39

Use the following information to answer the next two questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
What will happen in a market where a nonbinding price ceiling is removed?

A) There will be downward pressure on the price in the legal market.
B) The products sold will improve in quality and become more plentiful.
C) Sellers will face a reduced incentive to sell the product.
D) The price and quantity will not change in the legal market.
E) There will be increased pressure to buy and sell the good on the black market.

Question 40

Use the following information to answer the next two questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
If a price ceiling is imposed at $15 per unit when the equilibrium market price is $12,there will be:

A) no surplus or shortage.
B) a surplus.
C) a shortage.
D) a downward pressure on prices.
E) an upward pressure on prices.

Question 41

What will I do differently as a seller in the black market in the long run?

A) I will substitute away from producing the product.
B) I will substitute toward producing the product.
C) When there exists a binding price floor, I will be able to sell the good at a higher price.
D) When there exists a binding price ceiling, I will be able to sell the good at a lower price.
E) What I as a seller do in the long run will be no different from what I do in the short run.

Question 42

Which is a correct statement about a rent control law?

A) A rent control law is a price floor law that makes apartments cheaper to rent but discourages property owners from renting out apartments.
B) A rent control law encourages property owners to convert offices and condos into apartments.
C) A rent control law reduces housing shortages.
D) A rent control law encourages landlords to rent out apartments.
E) A rent control law is a price ceiling law that makes apartments cheaper to rent but discourages property owners from renting out apartments.

Question 43

Which of the following would be true in a city with rent-controlled apartments?

A) Homelessness is reduced.
B) Landlords face a greater incentive to provide housing.
C) Apartments are of higher quality.
D) Rents for those fortunate enough to find an apartment are lower than rents in nearby cities that lack rent controls.
E) It is more difficult for the landlord to find a tenant willing to rent the apartment.

Question 44

Let's say that you have a friend who was caught illegally buying a good on the black market.When the judge asks you to describe your friend's motivation as a buyer,which of the following would most likely be your reply?

A) My friend bought the good on the black market because a binding price floor had created a shortage in the legal market and my friend really needed the good.
B) My friend bought the good on the black market because a price ceiling caused the price to be lower on the black market.
C) My friend bought the good on the black market because a nonbinding price floor had created a shortage on the legal market and my friend really needed the good.
D) My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.
E) My friend bought the good on the black market because a nonbinding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.

Question 45

Apartment rent control in New York City is an example of:

A) government intervention to ensure a market equilibrium is reached.
B) a subsidy for landlords.
C) a nonbinding price floor.
D) a binding price ceiling.
E) a black market.

Question 46

In some countries,a binding price ceiling is placed on prescription medicines.What would you expect the prescription medicine market to be like in these countries?

A) The legal maximum price would mean that all consumers are able to receive the medicines they need at a price they can afford.
B) The legal maximum price would mean that pharmaceutical companies face an incentive to sell more prescription medicines in that country.
C) The legal maximum price would mean that it is unlikely that an illegal and dangerous black market for prescription drugs will form in that country.
D) The legal maximum price would mean that pharmaceutical companies face an incentive to develop new prescription medicines.
E) The legal maximum price would mean that not all consumers will have access to prescription medicines.

Question 47

If a good is subject to a binding price ceiling and you purchase it on the black market,what do you expect to happen to the availability of the good over time?

A) The availability of the good will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.(The shortage of the good will fall.)
B) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will fall.)
C) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will rise.)
D) The availability of the good will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.(The shortage of the good will fall.)
E) The availability of the good will not change over time.

Question 48

A real-life example of a binding price ceiling is:

A) a minimum wage law.
B) rent control.
C) a price gouging law.
D) a black market price.
E) a ration price.

Question 49

Let's say that you have a friend who was caught illegally selling a good on the black market.When the judge asks you to describe your friend's motivation as a seller,which of the following would most likely be your reply?

A) My friend sold the good on the black market because a binding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.
B) My friend sold the good on the black market because a nonbinding price ceiling caused the price to be lower on the black market.
C) My friend sold the good on the black market because a nonbinding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.
D) My friend sold the good on the black market because a nonbinding price floor made the good too expensive to purchase in the legal market and it was cheaper on the black market.
E) My friend sold the good on the black market because a binding price floor resulted in a surplus of the product in the legal market and he needed to get rid of the surplus.

Question 50

An example of a binding price ceiling is:

A) a minimum wage law that is set above the equilibrium price.
B) rent control that is set above the equilibrium price.
C) a black market that sets the price below the equilibrium price.
D) a minimum wage law that is set below the equilibrium price.
E) rent control that is set below the equilibrium price.

Question 51

What will I do differently as a buyer in the black market in the long run?

A) I will substitute away from the product.
B) I will substitute toward the product.
C) When a binding price floor exists, I will be willing to pay a higher price.
D) When a binding price ceiling exists, I will be willing to pay a lower price.
E) What I as a buyer do in the long run will be no different from what I do in the short run.

Question 52

You are the president of the United States.In an attempt to make gasoline prices cheaper,you have imposed a binding price ceiling on gas.What would you expect your critics to say?

A) The binding price ceiling will encourage oil companies to deplete the resource too quickly.
B) The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.
C) The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline.
D) The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.
E) The binding price ceiling will cause firms to produce only gasoline of the highest quality.

Question 53

Suppose you live in a community with no price controls.What do you expect will happen if your town borders a community where there is a binding price ceiling on most products?

A) Prices in the legal market in the community with a binding price ceiling will rise.
B) Prices in the legal market in the community with a binding price ceiling will fall.
C) There will be shortages in the community with a binding price ceiling.
D) More consumers will purchase the product in the community with the price ceiling.
E) The black market in your community will be larger than the black market in the community with the binding price ceiling.

Question 54

How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

A) Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes less elastic.
B) There are no changes, and elasticity of supply remains unchanged.
C) Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic.
D) Producers are less willing to substitute away from producing the good, and their elasticity of supply becomes less elastic.
E) Producers are less willing to substitute away from the good, and their elasticity of supply becomes more elastic.

Question 55

What is the long-run consequence of a price ceiling law?

A) A surplus will continue to exist and will grow larger over time.
B) A surplus will continue to exist and will grow smaller over time.
C) A shortage will continue to exist and will grow larger over time.
D) A shortage will continue to exist and will grow smaller over time.
E) The amount of the surplus will not change.

Question 56

How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

A) Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes less elastic.
B) There are no changes, and elasticity remains unchanged.
C) Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes more elastic.
D) Consumers are less willing to substitute away from the good, and their elasticity of demand becomes less elastic.
E) Consumers are less willing to substitute away from the good, and their elasticity of demand becomes more elastic.

Question 57

One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments.What will happen if I get elected and am able to pass such a law?

A) The price ceiling will increase the number of apartments available for rent.
B) The price ceiling will cause the demand curve to shift.
C) The price ceiling will cause the supply curve to shift.
D) The price ceiling will decrease the number of students who want to rent an apartment.
E) The price ceiling will cause students to sleep in their cars or to move in with their friends because they won't be able to find a place to live.

Question 58

Refer to the accompanying figure.At what price would there be the least pressure to form a black market?

A) $5
B) $8
C) $13
D) $15
E) $20

Question 59

Refer to the accompanying figure,which shows both short-run and long-run demand and supply curves.If there is a $4 binding price ceiling imposed on a pharmaceutical drug,what will be the amount of the disequilibrium in the short run?

A) There will be a shortage of 1,500,000 units.
B) There will be a shortage of 800,000 units.
C) There will not be a shortage; there will be a surplus.
D) There will be a shortage of 2,000,000 units.
E) There will be a shortage of 500,000 units.

Question 60

You are the president of the United States.In an attempt to make prescription drug prices cheaper,you have imposed a binding price ceiling on drugs.What would you expect your critics to say?

A) The binding price ceiling will encourage companies to overproduce drugs and will result in waste.
B) The binding price ceiling will discourage patients from obtaining the drugs they need.
C) The binding price ceiling will increase the likelihood that consumers will obtain needed drugs on the black market.
D) The binding price ceiling will cause firms to spend too many resources on the research and development of new drugs.
E) The binding price ceiling will cause firms to spend too much time making a drug without any flaws.

Question 61

Tina,an economics student,was just named Miss Florida,based in part on her answer to the question of why price gouging laws should be relaxed in that state.Tina won because she gave which of the following answers?

A) They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster.
B) They cause consumers to consume more of certain products during a time of disaster.
C) They cause producers to overproduce products during a time of disaster.
D) They act as a binding price floor in a time of disaster.
E) They cause a surplus in the product during a time a time of disaster.

Question 62

Imagine you find yourself in a heat wave and your air conditioner has broken.Unable to find a new one at the store because of a price gouging law,you purchase an air conditioner on the black market.What role did the price gouging law have?

A) It increased the willingness of firms to supply air conditioners when they were out of stock at the stores.
B) It increased consumer demand for air conditioners.
C) It decreased the incentive of individuals to supply the good on the black market.
D) It had no effect on consumers or firms in this situation.
E) It increased the incentive of individuals to supply the good on the black market.

Question 63

Refer to the accompanying table to answer the next five questions.

If rent control is established at $1,550,what would be the amount of disequilibrium in the apartment market?

A) There would be a shortage of 28,990 apartments.
B) There would be a surplus of 28,990 apartments that is reduced, over time, as individuals rent apartments in the illegal black market.
C) There would be neither a shortage nor a surplus.
D) There would be a surplus of 28,990 apartments that is eliminated through individuals renting apartments in the illegal black market.
E) There would be a surplus of 28,990 apartments that increases as houses and condominiums are converted into apartments.

Question 64

What will happen in a market where a binding price floor is removed?

A) The products sold will become scarcer.
B) There will be upward pressure on the prices.
C) There will be downward pressure on the prices.
D) The price or quantity of the product sold in the legal market will not change.
E) There will be increased pressure to buy and sell the good on the black market.

Question 65

Why are binding price floor laws passed?

A) They make goods less expensive.
B) They make goods available to the largest number of customers.
C) They encourage producers to produce goods in the most cost-efficient fashion.
D) They help producers receive higher prices for products sold in the legal market.
E) They discourage the formation of illegal black markets.

Question 66

Why is it often difficult to remove a binding price floor after it exists?

A) in general, because consumers benefit from the lower prices and would lobby their elected officials to keep the price control
B) in general, because consumers benefit from higher quality products and would lobby their elected officials to keep the price control
C) in general, because consumers benefit from larger products and would lobby their elected officials to keep the price control
D) in general, because sellers benefit from higher prices and would lobby their elected officials to keep the price control
E) in general, because it has little effect on the market price and people forget about it

Question 67

As a seller of a product subject to a binding price floor,you would be better off in which of the following situations?

A) You would be better off under a binding price floor because you would be able to sell all that you produce at a higher price.
B) You would be better off under a binding price floor because you would be able to sell goods that are smaller and cost less to produce.
C) You would be better off under a binding price floor because you would be able to sell goods of lower quality, which cost less to produce.
D) You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.
E) There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

Question 68

The minimum wage law is an example of a:

A) price floor.
B) price ceiling.
C) law that requires quantity demanded to equal quantity supplied.
D) law that allows individual employers and employees to make free decisions.
E) law that sets the minimum number of hours that an employee must work for wages during the week.

Question 69

Refer to the accompanying table to answer the next five questions.

If rent control is established at $1,750,what would be the amount of disequilibrium in the apartment market?

A) There would be a shortage of 23,500 apartments.
B) There would be a surplus of 23,500 apartments that is reduced, over time, as individuals rent apartments in the illegal black market.
C) There would be neither a shortage nor a surplus.
D) There would be a surplus of 23,500 apartments that is eliminated through individuals renting apartments in the illegal black market.
E) There would be a surplus of 23,500 apartments that increases as houses and condominiums are converted into apartments,

Question 70

___________ is a real-life example of a price floor.

A) A minimum wage law
B) Rent control
C) A price gouging law
D) A black market price
E) A ration price

Question 71

Refer to the accompanying table to answer the next five questions.

At what price level does the apartment market experience its largest shortage?

A) $1,500
B) $1,550
C) $1,700
D) $1,750
E) $1,800

Question 72

Suppose you live in a community with no price controls.What do you expect to happen if your town borders a community where there is a binding price floor on most products?

A) Prices in the legal market in the community with a binding price floor would fall.
B) There would be smaller surpluses in the community with a binding price floor.
C) More consumers would purchase the product in the community without a price floor.
D) The black market in the community with a binding price floor would be larger.
E) Sales of the product in the community with a binding price floor would increase.

Question 73

Refer to the accompanying table to answer the next five questions.

At what price level does the apartment market experience its largest surplus?

A) $1,500
B) $1,550
C) $1,700
D) $1,750
E) $1,800

Question 74

Which of the following is an accurate statement about the consequence of a binding price floor?

A) Binding price floors do not allow sellers to receive a higher price if they sell the product in the legal market.
B) Binding price floors encourage the formation of a black market.
C) Binding price floors discourage the formation of a black market.
D) Binding price floors create a shortage of the product.
E) Binding price floors cause consumers to want to purchase more of the product in the legal market.

Question 75

If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season,what will be the consequence?

A) Gas stations will be unable to sell all the gas they want at the temporary price ceiling price.
B) Consumers will be unable to buy all the gas they want at the temporary price ceiling price.
C) The supply curve for gas will increase and shift to the right.
D) The demand curve for gas will increase and shift to the right.
E) Equilibrium in the gas market will be achieved.

Question 76

If you were a politician,why would you find it difficult to remove a binding price floor?

A) because it greatly benefits firms, and they would spend a lot of money to lobby against the law's repeal
B) because it greatly benefits all consumers, who are also voters
C) because it greatly benefits society as a whole, with all consumers able to buy as much as firms produce
D) because it is not difficult to remove: the legal market price or quantity are not affected
E) because it greatly benefits the government, which receives additional tax revenue as a result

Question 77

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families.The law that sets wages would be an example of a:

A) minimum wage law.
B) fair wage law.
C) price ceiling.
D) black market price.
E) ration price.

Question 78

Refer to the accompanying table to answer the next five questions.

At what price level does the apartment market reach equilibrium?

A) $1,500
B) $1,550
C) $1,600
D) $1,650
E) $1,700

Question 79

Do all sellers benefit from a binding price floor?

A) No.A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market.
B) Yes.A binding price floor benefits all sellers because it allows all sellers to sell as much as they produce on the legal market.
C) No.A binding price floor doesn't benefit any sellers because sellers will be unwilling to sell any of their products.
D) No.A binding price floor benefits only some sellers because the price is initially higher but then eventually decreases to the equilibrium price.
E) No.A binding price floor doesn't benefit any buyers because buyers are unwilling to purchase any of the products at a price lower than the equilibrium.

Question 80

A binding price floor creates a surplus,which means:

A) there will be downward pressure on prices until quantity demanded equals quantity supplied.
B) there will be upward pressure on prices until quantity demanded equals quantity supplied.
C) there will be upward pressure on the quantity demanded until quantity demanded equals quantity supplied.
D) the quantity demanded will always exceed the quantity supplied.
E) the quantity demanded will always be smaller than the quantity supplied.