Question 1

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

Accepted Answer

A)  price ceiling set above the equilibrium price. 
B)  price floor set below the equilibrium price. 
C)  binding price floor. 
D)  binding price ceiling.

Question 2

Use the following to answer questions:
Figure: The Shrimp Market 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 kilograms,the quota rent per kilogram is:

Accepted Answer

A)  $15. 
B)  $10. 
C)  $5. 
D)  The quota rent cannot be determined from the information provided.

Question 3

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.

Question 4

Which statement(s)is/are TRUE?
I.Quantity controls set below the market equilibrium quantity drive a wedge between the demand price and the supply price of the good.
II.The difference between the demand price and the supply price at the quota limit is consumer surplus.
III.Quantity controls have no undesirable side effects.

Accepted Answer

A)  I only 
B)  II only 
C)  II and III 
D)  I,II,and III

Question 5

A binding price ceiling is usually designed to:

Accepted Answer

A)  keep prices below the equilibrium level. 
B)  increase the quality of the good. 
C)  prevent shortages. 
D)  increase efficiency.

Question 6

Suppose that the federal government 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 7

Use the following to answer question : 
-(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.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions:
Table: The Market for Taxi Rides 
-(Table: The Market for Taxi Rides)Use Table: The Market for Taxi Rides.If a government quota limit at 7 million rides is imposed on this market,the quota rent that will accrue to the owner of a taxi licence will be _____ per ride,but there will be a total missed opportunity (inefficiency)to consumers and producers of _____ million rides.

Accepted Answer

A)  $1;1 
B)  $2;2 
C)  $3;3 
D)  $4;4

Question 10

Licences allowing taxis to operate issued by New York City in the 1930s are called medallions.

Accepted Answer

A) True 
 B)False

Question 11

Rent controls usually set a price 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.

Question 12

Use the following to answer questions: 
-(Table: Market for Apartments)Use Table: Market for Apartments.If a price ceiling of $700 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)  shortage of 0.6 
C)  surplus of 0.2 
D)  shortage of 0.2

Question 13

The government imposes a price ceiling below the equilibrium price.The price ceiling will cause:

Accepted Answer

A)  demand to decrease. 
B)  supply to increase. 
C)  a shortage of the good. 
D)  an increase in the quality of the good.

Question 14

Use the following to answer questions: 
-(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent3:

Accepted Answer

A)  the shortage of rental units is the distance Q3-Q1. 
B)  some renters will be willing to pay a price as high as Rent4 for Q3 units. 
C)  no one will have to pay a higher actual price than Rent0,nor will anyone be willing to do so. 
D)  rent will remain at Rent2.

Question 15

Use the following to answer questions: 
-(Table: Quantity Supplied and Quantity Demanded)Use Table: Quantity Supplied and Quantity Demanded.A price floor equal to _____ would produce excess supply in this market.

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20

Question 16

Use the following to answer questions: 
-(Figure: Price Controls)Use Figure: Price Controls.The consumer surplus lost to a price floor at point b is equal to the area:

Accepted Answer

A)  abe. 
B)  egh. 
C)  bcge. 
D)  bcke.

Question 17

Use the following to answer questions: 
-(Figure: Rent Controls)Use Figure: Rent Controls.If rent controls are set at Rent1:

Accepted Answer

A)  rental apartments may be of inefficiently low quality. 
B)  there will be an efficient allocation of rentals. 
C)  some landlords may break the law by renting below the mandated price. 
D)  new apartments will be constructed.

Question 18

Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per litre when the market price is $1.50.The Saudi government's actions will:

Accepted Answer

A)  improve efficiency since the low prices will force producers to find cheaper production methods. 
B)  result in gasoline surpluses even in an oil-rich country. 
C)  cause gasoline shortages even in an oil-rich country. 
D)  necessarily improve equality between rich and poor since the poor can now afford gasoline.

Question 20

Use the following to answer questions: 
-(Table: Quantity Supplied and Quantity Demanded)Use Table: Quantity Supplied and Quantity Demanded.If a price ceiling of $10 is imposed in this market:

Accepted Answer

A)  the quantity demanded will be greater than the quantity supplied. 
B)  the quantity supplied will be greater than the quantity demanded. 
C)  an equilibrium quantity will result. 
D)  excess supply equal to 25 units will result.

Exam 4: Price Controls and Quotas: Meddling With Markets

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

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 kilograms,the quota rent per kilogram is:

A binding price floor causes:

A binding price ceiling is usually designed to:

Suppose that the federal government 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.

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

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

Licences allowing taxis to operate issued by New York City in the 1930s are called medallions.

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

Use the following to answer questions: -(Table: Market for Apartments) Use Table: Market for Apartments.If a price ceiling of $700 is imposed on this market,the result will be an inefficiency in the form of a _____ million apartments.

The government imposes a price ceiling below the equilibrium price.The price ceiling will cause:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls.If rent controls are set at Rent₃:

Use the following to answer questions: -(Table: Quantity Supplied and Quantity Demanded) Use Table: Quantity Supplied and Quantity Demanded.A price floor equal to _____ would produce excess supply in this market.

Use the following to answer questions: -(Figure: Price Controls) Use Figure: Price Controls.The consumer surplus lost to a price floor at point b is equal to the area:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls.If rent controls are set at Rent₁:

Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Suppose that the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per litre when the market price is $1.50.The Saudi government's actions will:

Use the following to answer questions: -(Table: Quantity Supplied and Quantity Demanded) Use Table: Quantity Supplied and Quantity Demanded.If a price ceiling of $10 is imposed in this market:

Exam 4: Price Controls and Quotas: Meddling With Markets

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

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 kilograms,the quota rent per kilogram is:

A binding price floor causes:

A binding price ceiling is usually designed to:

Suppose that the federal government 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.

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

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

Licences allowing taxis to operate issued by New York City in the 1930s are called medallions.

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

Use the following to answer questions: -(Table: Market for Apartments) Use Table: Market for Apartments.If a price ceiling of $700 is imposed on this market,the result will be an inefficiency in the form of a _____ million apartments.

The government imposes a price ceiling below the equilibrium price.The price ceiling will cause:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls.If rent controls are set at Rent3:

Use the following to answer questions: -(Table: Quantity Supplied and Quantity Demanded) Use Table: Quantity Supplied and Quantity Demanded.A price floor equal to _____ would produce excess supply in this market.

Use the following to answer questions: -(Figure: Price Controls) Use Figure: Price Controls.The consumer surplus lost to a price floor at point b is equal to the area:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls.If rent controls are set at Rent1:

Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Suppose that the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per litre when the market price is $1.50.The Saudi government's actions will:

Use the following to answer questions: -(Table: Quantity Supplied and Quantity Demanded) Use Table: Quantity Supplied and Quantity Demanded.If a price ceiling of $10 is imposed in this market:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls.If rent controls are set at Rent₃:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls.If rent controls are set at Rent₁: