978-0132479431 Chapter 7 Part 3

21

51) The above figure shows the market for DVDs. The government decides that all citizens

deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After

this price ceiling is in effect and taking account of the resources lost in search, consumer surplus

equals ________.

A) $900,000

B) $400,000

C) $200,000

D) $180,000

E) $100,000

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: KG

AACSB: Analytical reasoning

52) The above figure shows the market for DVDs. The government decides that all citizens

deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After

this price ceiling is in effect, producer surplus equals ________.

A) $900,000

B) $400,000

C) $200,000

D) $100,000

E) $1,800,000

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: KG

AACSB: Analytical reasoning

22

53) The above figure shows the market for DVDs. The government decides that all citizens

deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After

this price ceiling is in effect, deadweight loss equals ________.

A) $1,600,000

B) $200,000

C) $800,000

D) $1,800,000

E) $400,000

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: KG

AACSB: Analytical reasoning

54) In a housing market with a rent ceiling set below the equilibrium rent, as time passes the

supply of apartments

A) decreases.

B) increases.

C) does not change.

D) becomes fixed by the government.

E) increases while the demand for apartments decreases.

Skill: Level 2: Using definitions

Section: Checkpoint 7.1

Author: JC

AACSB: Reflective thinking

55) New York City, which has had a rent ceiling law for more than fifty years, has many

abandoned apartment buildings throughout the city. Which of the following explains this?

A) Few workers with jobs in the city want to live in there because of pollution.

B) No building permits for new apartment buildings have been issued for over fifty years.

C) Once any building gets so old, it is abandoned.

D) Landlords have no incentive to finance maintenance and remodeling of apartment buildings.

E) Rent ceilings make the construction of new buildings so profitable that old buildings are

simply abandoned.

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: TS

AACSB: Reflective thinking

23

56) Which of the following is an example of the unfairness of rent control?

A) Voluntary exchange is encouraged by rent control.

B) Racial discrimination in renting is discouraged by rent control.

C) Newcomers have a more difficult time finding apartments.

D) Rich people do not get apartments in these markets.

E) Too many people rent apartments.

Skill: Level 2: Using definitions

Section: Checkpoint 7.1

Author: JC

AACSB: Ethical reasoning

57) Suppose the city of Chicago imposes a rent control program that fixes rents at $400 below

the equilibrium rent. With this plan

A) the quantity of apartments demanded will increase.

B) the quantity of apartments supplied will increase.

C) young people and poor people will have an easier time finding apartments.

D) the deadweight loss in Chicago’s apartment market will be eliminated.

E) there will be a surplus of apartments offered for rent.

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: JC

AACSB: Reflective thinking

58) Rent controls

A) create a deadweight loss.

B) increase maintenance by landlords.

C) benefit people who live in rent controlled apartments.

D) Both answers A and C are correct.

E) Both answers B and C are correct.

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: SA

AACSB: Reflective thinking

24

59) Rent ceilings are difficult to abolish because

A) they create such large profits for landlords.

B) current renters offer political support for ceilings.

C) the government doesn’t like to give up the tax revenues associated with ceilings.

D) they result in an efficient use of resources.

E) landlords lobby to keep them in place.

Skill: Level 2: Using definitions

Section: Checkpoint 7.1

Author: SB

AACSB: Reflective thinking

60) A price ceiling is a government regulation that makes it illegal to charge a price

A) below the equilibrium price.

B) above the equilibrium price.

C) for a good or service.

D) above some specified level.

E) below some specified level.

Skill: Level 1: Definition

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Reflective thinking

61) When a price ceiling is set below the equilibrium price, the quantity supplied ________ the

quantity demanded and ________ exists.

A) is less than; a surplus

B) is less than; a shortage

C) is greater than; a surplus

D) is greater than; a shortage

E) equals; an equilibrium

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Reflective thinking

25

62) The graph shows the market for holiday condos in West Palm Beach. The equilibrium rent is

________ a week.

A) any amount less than $1,550

B) any amount greater than $1,550

C) $1,550

D) $4,000

E) None of the above answers is correct.

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: MyEconLab Web Site

AACSB: Analytical reasoning

63) In a housing market with a rent ceiling set below the equilibrium rent,

A) some people seeking an apartment to rent will not be able to find one.

B) the total cost of renting an apartment will decrease for all those seeking housing.

C) some landlords will not be able to find renters to fill available apartments.

D) search will decrease because renters no longer need to search for less expensive apartments.

E) None of the above answers are correct because to have an impact the rent ceiling must be set

above the equilibrium rent.

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Reflective thinking

26

64) The graph shows the market for ski chalets in Aspen. The Aspen Tourist Board asks the local

government to impose a rent ceiling on ski chalets. If the rent ceiling is set at $1,900 a week,

then there is ________.

A) a shortage of 3,000 chalets a week

B) a surplus of 3,000 chalets a week

C) neither a shortage or surplus of chalets

D) a shortage of 6,000 chalets a week

E) a surplus of 6,000 chalets a week.

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: MyEconLab Web Site

AACSB: Analytical reasoning

65) A rent ceiling on housing creates a problem of allocating the available housing units because

A) the demand for housing decreases and the demand curve shifts leftward.

B) the supply of housing increases and the supply curve shifts rightward.

C) a shortage of apartments occurs.

D) a surplus of apartments occurs.

E) it eliminates search, which is one of the major ways housing units are allocated.

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Reflective thinking

27

66) Suppose that the government imposes a price ceiling on gasoline that is below the

equilibrium price. The black market for gasoline is ________ market in which the price

________ ceiling price.

A) a legal; exceeds the

B) an illegal; exceeds the

C) a legal; is less than the

D) an illegal; is less than the

E) an illegal; equals

Skill: Level 1: Definition

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Reflective thinking

67) If a rent ceiling is imposed that is less than the equilibrium rent, which of the following

outcomes is most likely to occur?

A) reduced search activity

B) black market activity

C) a building boom

D) a housing surplus

E) None of the above answers is correct because to have an impact the rent ceiling must be above

the equilibrium rent.

Skill: Level 2: Using definitions

Section: Checkpoint 7.1

Author: MyEconLab Web Site

AACSB: Reflective thinking

28

68) The graph shows the market for ski chalets in Aspen. If a rent ceiling is set at $1,900 a week,

then the maximum amount charged in the black market is ________ a week.

A) $1,900

B) $2,050

C) $2,125

D) $225

E) $150

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: MyEconLab Web Site

AACSB: Analytical reasoning

29

69) The graph shows the market for holiday condos in West Palm Beach. If a rent ceiling is set at

$1,700 a week, the quantity of holiday condos rented ________.

A) is 2,000 a week

B) is 4,000 a week

C) is 5,000 a week

D) is some amount but more information is needed to determine the amount.

E) depends on the black market

Skill: Level 3: Using models

Section: Checkpoint 7.1

Author: MyEconLab Web Site

AACSB: Analytical reasoning

70) Rent ceilings

A) increase search activity.

B) result in surpluses.

C) create efficiency.

D) benefit producers.

E) have no effect if they are set below the equilibrium rent.

Skill: Level 2: Using definitions

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Reflective thinking

30

71) A rent ceiling creates a deadweight loss

A) if it is set below the equilibrium rent.

B) if it is set equal to the equilibrium rent.

C) if it set above the equilibrium rent.

D) if it decreases the taxes the government collects in the housing market.

E) never, because if it did create a deadweight loss, the government would not impose it.

Skill: Level 4: Applying models

Section: Checkpoint 7.1

Author: STUDY GUIDE

AACSB: Analytical reasoning

72) If a price ceiling is introduced in the market for milk below the market equilibrium price,

then the producer surplus made by dairy farmers ________.

A) will increase

B) will decrease

C) will not change

D) might increase or decrease depending on whether the demand for milk increases or decreases

E) might increase or decrease depending on whether the supply of milk decreases or increases

Skill: Level 2: Using definitions

Section: Checkpoint 7.1

Author: MyEconLab Web Site

AACSB: Analytical reasoning