Deck 6: Price Controls

Question 1

A consequence of either a price ceiling or a price floor is

A) a nonbinding price control.
B) a market surplus.
C) a market shortage.
D) waiting lines.
E) Price floors and price ceilings cannot have an identical outcome.

Answer 1

a nonbinding price control.

Question 2

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.

Answer 2

black market for a market price that is lower.

Question 3

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 3

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

Question 4

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 5

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.

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

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 products.
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 8

Use the following information to answer the following questions.
Market for flat-screen TVs:
Demand: Q_d = 2,600 - 5P
Supply: Q_s = -1,000 + 10P
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 9

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 products they sell,which in turn increases the quantity demanded.

Question 10

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 products they sell,which in turn increases the quantity demanded.

Question 11

Government officials who impose price controls

A) understand that their action causes a trade-off: giving up fairness to get efficiency.
B) understand that their action will induce a better achievement of the gains from trade.
C) understand that their action is supported by most economists,and hence best for society.
D) might not understand that their action causes confusion in the price signaling mechanism that directs the allocation of resources.
E) might not understand that their action will not get them the votes they seek.

Question 12

Why would a politician 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 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

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 15

A binding price ceiling will have which of 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 16

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 17

A market where exchanges occur despite price regulations is called a(n)________ market.

A) hidden
B) noncompetitive
C) black
D) prohibited
E) outlaw

Question 18

Price controls can be traced back as far as

A) ancient Babylon of 4,000 years ago.
B) ancient Greece of 2,500 years ago
C) ancient Rome of 2,000 years ago.
D) ancient Egypt of 3,000 years ago.
E) recent times,since organized markets under organized government and legal systems are necessary to effectively impose such controls.

Question 19

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 20

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 21

Use the following information to answer the following questions.
Market for used cars:
Demand: Q_d = 154,000 - 86P
Supply: Q_s = -100 + 14P
What would be the equilibrium quantity for used cars?

A) 100
B) 154,100
C) 21,474
D) 1,541
E) 153,900

Question 22

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 products.
D) The price and quantity will not change in the legal market.
E) There will be increased pressure to buy and sell the goods on the black market.

Question 23

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 24

Use the following information to answer the following questions.
Market for used cars:
Demand: Q_d = 154,000 - 86P
Supply: Q_s = -100 + 14P
What would be the quantity supplied if a price floor is set at $2,000?

A) 9,900
B) 200
C) 27,900
D) 1,541
E) 18,000

Question 25

Use the following information to answer the following questions.
Market for flat-screen TVs:
Demand: Q_d = 2,600 - 5P
Supply: Q_s = -1,000 + 10P
What would be the equilibrium quantity for flat-screen TVs?

A) 240
B) 140
C) 24
D) 1,400
E) 1,600

Question 26

Use the following information to answer the following questions.
Market for flat-screen TVs:
Demand: Q_d = 2,600 - 5P
Supply: Q_s = -1,000 + 10P
What would be the quantity demanded if a price floor is set at $300?

A) 900
B) 200
C) 240
D) 1,100
E) 2,000

Question 27

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

A) 100
B) 154,100
C) 27,900
D) 21,474
E) 18,000

Question 28

Use the following information to answer the following questions.
Market for a new hardcover book:
Demand: Q_d = 325 - 8P
Supply: Q_s = -60 + 3P
What would be the equilibrium quantity for hardcover books?

A) 100
B) 45
C) 385
D) 35
E) 11

Question 29

Use the following information to answer the following questions.
Market for flat-screen TVs:
Demand: Q_d = 2,600 - 5P
Supply: Q_s = -1,000 + 10P
What would be the quantity demanded if a price floor is set at $100?

A) 240
B) 2,100
C) 0
D) 1,400
E) 700

Question 30

Use the following information to answer the following questions.
Market for used cars:
Demand: Q_d = 154,000 - 86P
Supply: Q_s = -100 + 14P
What would be the quantity supplied if a price floor is set at $100?

A) 100
B) 154,100
C) 1,541
D) 21,474
E) 1,300

Question 31

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 32

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 33

Use the following information to answer the following questions.
Market for used cars:
Demand: Q_d = 154,000 - 86P
Supply: Q_s = -100 + 14P
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

Question 34

Use the following information to answer the following questions.
Market for a new hardcover book:
Demand: Q_d = 325 - 8P
Supply: Q_s = -60 + 3P
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 35

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

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

Question 36

Use the following information to answer the following questions.
Market for a new hardcover book:
Demand: Q_d = 325 - 8P
Supply: Q_s = -60 + 3P
What would be the quantity supplied if a price floor is set at $20?

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

Question 37

Use the following information to answer the following questions.
Market for a new hardcover book:
Demand: Q_d = 325 - 8P
Supply: Q_s = -60 + 3P
What would be the quantity supplied if a price floor is set at $50?

A) 90
B) 45
C) 265
D) 165
E) 75

Question 38

Use the following information to answer the following questions.
Market for used cars:
Demand: Q_d = 154,000 - 86P
Supply: Q_s = -100 + 14P
What would be the equilibrium price for used cars?

A) $100
B) $154,100
C) $21,474
D) $1,541
E) $72

Question 39

Use the following information to answer the following questions.
Market for a new hardcover book:
Demand: Q_d = 325 - 8P
Supply: Q_s = -60 + 3P
What would be the equilibrium price for hardcover books?

A) $100
B) $45
C) $385
D) $35
E) $11

Question 40

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

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

Question 41

What would you expect the consequences of size and quality to 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 42

Refer to the accompanying figure to answer the following 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 43

Roland is the president of the United States.In an attempt to make prescription drug prices cheaper,he has imposed a binding price ceiling on drugs.What would he expect his 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 44

Let's say that Lewis has a friend who was caught illegally buying a good on the black market.When the judge asks him to describe his friend's motivation as a buyer,which of the following would most likely be his 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

Refer to the accompanying figure to answer the following 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 46

Refer to the accompanying figure to answer the following 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 47

One strategy someone 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 he or she gets elected and is 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 places to live.

Question 48

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 49

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 50

If a good is subject to a binding price ceiling and Anna purchases it on the black market,what can she 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 51

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 52

Why does a shortage that occurs under a binding price ceiling increase 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 53

Let's say that Alisha has a friend who was caught illegally selling a good on the black market.When the judge asks her to describe her friend's motivation as a seller,which of the following would most likely be her 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 54

Refer to the accompanying figure to answer the following 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 55

In some countries,a binding price ceiling is placed on prescription medicines.What would someone 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 prices 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 56

Refer to the accompanying figure to answer the following questions.

At the price of the binding price floor,by how much would the quantity supplied change from the market equilibrium?

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

Question 57

Suppose Kate lives in a community with no price controls.What could she expect will happen if her 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 58

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 59

One 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 60

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 61

A real-life,long-run 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 62

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 63

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 64

The usual stated political goal of rent control is

A) to conduct social engineering via economic rules.
B) to pander to real estate landlords by assuring them a low occupancy rate.
C) to pander to the low income voters by assuring them enough living space.
D) to assist the low income at a cost to society,in convenient,affordable housing.
E) prices that allow rationing to the highest bidder.

Question 65

Suppose Solomon lives in a community with no price controls.What do you expect will happen if his 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 products in the community with the price ceiling.
E) The black market in his community will be larger than the black market in the community with the binding price ceiling.

Question 66

Katherine is the president of the United States.In an attempt to make gasoline prices cheaper,she has imposed a binding price ceiling on gas.What would she expect her 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 automobiles 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 67

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

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

Question 68

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 69

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

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

Question 70

Price gouging laws will usually result in ________ the product in the distressed market.

A) more supply of
B) more local business start-ups to supply
C) government setting up an agency to regulate supply of
D) more Craigslist postings for
E) more demand than supply of

Question 71

Price gouging laws

A) are necessary and proper to prevent predatory pricing on victims of disasters.
B) keep distressed markets in equilibrium by maintaining "normal" prices.
C) restrict entrepreneurial behavior and consumer choice.
D) are enacted to encourage government-sponsored relief efforts.
E) have little effect on distressed markets and thus are irrelevant.

Question 72

Which of the following is NOT a mechanism for allocating housing in rent-controlled areas?

A) ethnicity
B) waiting lists
C) price
D) bribes/kickbacks
E) political favors

Question 73

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 74

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 75

Refer to the accompanying figure.If there is a $700 government-imposed price antigouging law imposed on generators,how will the market be affected in the short run?

A) There will be a shortage of 200 generators.
B) There will be a shortage of 100 generators.
C) The government will intervene and order a surplus of 100 generators.
D) Price gougers will enter the market and provide a surplus of 100 generators.
E) No changes will occur in the market,since anti-price-gouging laws are now in effect.

Question 76

The economic entity most likely to engage in price gouging is

A) the manufacturer of the product,such as a Honda generator.
B) a national big-box store,such as Target or Walmart.
C) a local,regular supplier of the product.
D) an individual or business who has a supply of the product somewhere else.
E) a local resident who wants to get rid of his or her own product.

Question 77

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 78

Price gouging laws are an example of

A) rules for keeping market prices low enough for buyers to afford the product.
B) a price ceiling.
C) rules to prevent a market shortage.
D) rules to prevent black market pricing.
E) prices to allow rationing to the highest bidder.

Question 79

An example of a binding price ceiling is ________ the equilibrium price.

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

Question 80

The long-run effects of rent control support one of the five foundations of economics,namely,that

A) people respond to incentives.
B) society faces a trade-off between homelessness and rent control.
C) one must give up something in order to get something else.
D) social planners must think marginally in allocating housing.
E) exchange makes everyone better off.