Question 1

The most common example of a price being controlled above market levels involves a good for which the:

Accepted Answer

A)   sellers outnumber the buyers.
B)   buyers outnumber the sellers.
C)   market is controlled by a monopolist.
D)   market is controlled by the government.E) B) and D)
F) None of the above

Question 2

A market with price ceilings fails to maximize all of the following EXCEPT:

Accepted Answer

A)   the gains from trade.
B)   consumer surplus.
C)   excess supply.
D)   producer surplus.E) All of the above
F) A) and C)

Question 3

In the presence of a price floor, some suppliers are willing to take a lower price for their goods, but these trades never take place because they are illegal. This illustrates the problem of misallocation of resources.

Accepted Answer

A) True 
 B)False

Question 4

A price floor is:

Accepted Answer

A)   a maximum price allowed by law.
B)   a minimum price allowed by law.
C)   able to produce an efficient outcome.
D)   a tool used to increase government revenues.E) A) and C)
F) A) and D)

Question 5

Once one accounts for time costs and bribes, it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions: Figure: Effects of Price Ceilings 
-(Figure: Effects of Price Ceilings)  Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Accepted Answer

A)   $2.00.
B)   $2.50.
C)   $3.00.
D)   $4.00.E) A) and C)
F) A) and B)

Question 7

For a given demand curve, the high-valued uses are at the _____, and the low-valued uses are at the _____.

Accepted Answer

A)   top; bottom
B)   bottom; top
C)   top; top
D)   bottom; bottomE) None of the above
F) A) and B)

Question 8

An increase in the minimum wage would likely increase unemployment among which group of workers?

Accepted Answer

A)   college graduates
B)   unskilled workers
C)   female workers
D)   older workersE) B) and C)
F) A) and D)

Question 9

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Accepted Answer

A) True 
 B)False

Question 10

When a price ceiling is in effect, goods and services:

Accepted Answer

A)   are still allocated efficiently.
B)   are not necessarily supplied by their lowest-cost producer.
C)   do not necessarily flow to their highest-valued use.
D)   are neither necessarily supplied by their lowest-cost producer nor do they flow to their highest-valued use.E) C) and D)
F) All of the above

Question 11

Which statement(s)  is TRUE?
I. In the long run, rent-control laws create incentives to turn apartments into hotels or parking garages.
II. Apartment owners are less likely to do routine maintenance when the government controls apartment rents.
III. Rent-controlled apartments are more likely to be allocated by discrimination than non-rent-controlled apartments.

Accepted Answer

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

Question 12

A price ceiling is a minimum price below the market price that can be legally charged.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions: Figure: Government Price Controls 
-(Figure: Government Price Controls)  Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.

Accepted Answer

A)   price floor; $31
B)   price floor; $17
C)   price ceiling; $10
D)   price ceiling; $17E) C) and D)
F) None of the above

Question 14

Use the following to answer questions: Figure: Government Price Controls 
-(Figure: Government Price Controls)  Refer to the figure. If the government sets the price ceiling at $31, there will be:

Accepted Answer

A)   a shortage of 15 units.
B)   a surplus of 15 units.
C)   a supply of 20 units.
D)   no effect on the market.E) A) and C)
F) C) and D)

Question 15

Price controls cause resources to be misallocated by:

Accepted Answer

A)   distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay.
B)   distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply.
C)   distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to pay.
D)   distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to supply.E) A) and D)
F) None of the above

Question 16

Which of the following best represents the misallocation of resources that would occur under a price ceiling on bottled water following a major hurricane?

Accepted Answer

A)   Bottles of water sit on the shelves because nobody can afford it.
B)   A family in a distant state takes time off work to bring bottled water to the hurricane-ravaged area.
C)   A family in a distant state gives bottled water to its dog, but a family in the hurricane area cannot find bottled water to drink.
D)   Families in the hurricane area brush their teeth with bottled water but cannot find enough to drink.E) C) and D)
F) B) and C)

Question 17

The minimum wage causes unemployment mainly among poor, unskilled workers.

Accepted Answer

A) True 
 B)False

Question 18

What is blat?

Accepted Answer

A)   a long line
B)   the time costs associated with buying price-controlled goods
C)   the use of political connections to get favors
D)   a dilapidated rent-controlled apartment.E) B) and C)
F) A) and C)

Question 19

If a price ceiling is below equilibrium price, the willingness to pay for the quantity provided will be above equilibrium price.

Accepted Answer

A) True 
 B)False

Question 20

If a price floor is below the equilibrium price, a shortage will result.

Accepted Answer

A) True 
 B)False

Exam 5: Price Ceilings and Floors

A price floor is:

Correct Answer
verified

Once one accounts for time costs and bribes, it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Correct Answer
verified

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

Correct Answer
verified

An increase in the minimum wage would likely increase unemployment among which group of workers?

Correct Answer
verified

A price ceiling is a minimum price below the market price that can be legally charged.

Correct Answer
verified

A market with price ceilings fails to maximize all of the following EXCEPT:

Correct Answer
verified

Which of the following best represents the misallocation of resources that would occur under a price ceiling on bottled water following a major hurricane?

Correct Answer
verified

Price controls cause resources to be misallocated by:

Correct Answer
verified

The minimum wage causes unemployment mainly among poor, unskilled workers.

Correct Answer
verified

Use the following to answer questions: Figure: Effects of Price Ceilings -(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Correct Answer
verified

If a price ceiling is below equilibrium price, the willingness to pay for the quantity provided will be above equilibrium price.

Correct Answer
verified

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the is set at .

Correct Answer
verified

The most common example of a price being controlled above market levels involves a good for which the:

Correct Answer
verified

In the presence of a price floor, some suppliers are willing to take a lower price for their goods, but these trades never take place because they are illegal. This illustrates the problem of misallocation of resources.

Correct Answer
verified

If a price floor is below the equilibrium price, a shortage will result.

Correct Answer
verified

Correct Answer
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What is blat?

Correct Answer
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Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Correct Answer
verified

For a given demand curve, the high-valued uses are at the _, and the low-valued uses are at the _.

Correct Answer
verified

When a price ceiling is in effect, goods and services:

Correct Answer
verified

Exam 5: Price Ceilings and Floors

A price floor is:

Correct AnswerverifiedShow Answer

Once one accounts for time costs and bribes, it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

Correct AnswerverifiedShow Answer

An increase in the minimum wage would likely increase unemployment among which group of workers?

Correct AnswerverifiedShow Answer

A price ceiling is a minimum price below the market price that can be legally charged.

Correct AnswerverifiedShow Answer

A market with price ceilings fails to maximize all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Which of the following best represents the misallocation of resources that would occur under a price ceiling on bottled water following a major hurricane?

Correct AnswerverifiedShow Answer

Price controls cause resources to be misallocated by:

Correct AnswerverifiedShow Answer

The minimum wage causes unemployment mainly among poor, unskilled workers.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Effects of Price Ceilings -(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Correct AnswerverifiedShow Answer

If a price ceiling is below equilibrium price, the willingness to pay for the quantity provided will be above equilibrium price.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.

Correct AnswerverifiedShow Answer

The most common example of a price being controlled above market levels involves a good for which the:

Correct AnswerverifiedShow Answer

In the presence of a price floor, some suppliers are willing to take a lower price for their goods, but these trades never take place because they are illegal. This illustrates the problem of misallocation of resources.

Correct AnswerverifiedShow Answer

If a price floor is below the equilibrium price, a shortage will result.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is blat?

Correct AnswerverifiedShow Answer

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Correct AnswerverifiedShow Answer

For a given demand curve, the high-valued uses are at the _____, and the low-valued uses are at the _____.

Correct AnswerverifiedShow Answer

When a price ceiling is in effect, goods and services:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the is set at .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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For a given demand curve, the high-valued uses are at the _, and the low-valued uses are at the _.

Correct Answer
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Correct Answer
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