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61
Copyright © 2011 Pearson Education, Inc.
71) If a minimum wage is introduced that is above the equilibrium wage rate,
A) the quantity of labor demanded increases.
B) job search activity increases.
C) the supply of labor increases and the supply of labor curve shifts rightward.
D) unemployment decreases because more workers accept jobs at the higher minimum wage
rate.
E) the quantity of labor supplied decreases because of the increase in unemployment.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: STUDY GUIDE
AACSB: Reflective thinking
72) The graph shows the labor market for teenagers in Atlanta. If the government sets a
minimum wage of $6 an hour, then the maximum amount that a teenager would be willing to
spend on job search is ________ an hour.
A) $2
B) $4
C) $5
D) $6
E) $3
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: MyEconLab Web Site
AACSB: Analytical reasoning
62
Copyright © 2011 Pearson Education, Inc.
73) The minimum wage is set above the equilibrium wage rate. Does the minimum wage create
inefficiency?
A) Yes
B) No
C) Only if the supply of labor is perfectly inelastic
D) Only if the supply of labor is perfectly elastic
E) Only if employment exceeds the efficient amount
Skill: Level 1: Definition
Section: Checkpoint 7.2
Author: STUDY GUIDE
AACSB: Reflective thinking
74) A minimum wage set above the equilibrium wage rate creates
A) efficiency because it increases most workers' wages.
B) efficiency because few workers lose their jobs.
C) efficiency because workers can earn a living wage.
D) inefficiency and a deadweight loss.
E) inefficiency because it creates excessive employment.
Skill: Level 1: Definition
Section: Checkpoint 7.2
Author: MyEconLab Web Site
AACSB: Reflective thinking
63
Copyright © 2011 Pearson Education, Inc.
75) The graph shows the labor market for fast-food workers in Sioux City. If the government sets
a minimum wage of $7 an hour, then the labor market is ________ and marginal benefit
________ marginal cost.
A) inefficient; is less than
B) inefficient; equals
C) efficient; equals
D) inefficient; is greater than
E) inefficient; cannot be compared to
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: MyEconLab Web Site
AACSB: Analytical reasoning
76) When the minimum wage is raised, the ________ union labor ________.
A) demand for; increases
B) demand for; decreases
C) supply of; increases
D) supply of; decreases
E) demand for; does not change
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: STUDY GUIDE
AACSB: Reflective thinking
64
Copyright © 2011 Pearson Education, Inc.
7.3 Price Supports in Agriculture
1) The methods that governments use to support farmers vary, but they almost always involve
some or all the following methods except
A) pay farmers a subsidy.
B) introduce a price floor.
C) isolate the domestic market from global competition.
D) tax farmers.
E) use price supports.
Skill: Level 1: Definition
Section: Checkpoint 7.3
Author: KG
AACSB: Reflective thinking
2) A price floor in an agricultural market is called a
A) agricultural floor.
B) farm support.
C) price support.
D) farm subsidy.
E) farm support price.
Skill: Level 1: Definition
Section: Checkpoint 7.3
Author: KG
AACSB: Reflective thinking
3) Which of the following is true regarding a price support set above the equilibrium price?
i. The price support increases the price consumers pay.
ii. The price support creates a deadweight loss.
iii. The price support decreases output.
A) i and ii
B) i and iii
C) iii only
D) i, ii, and iii
E) i only
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Reflective thinking
65
Copyright © 2011 Pearson Education, Inc.
4) In a crop market with a price support above the equilibrium price, the total amount of the
subsidy paid to farmers is equal to the
A) quantity of the surplus crop multiplied by the support price.
B) quantity of the crop produced multiplied by the support price.
C) quantity of the crop purchased by domestic users multiplied by the support price.
D) quantity of the surplus crop multiplied by the equilibrium price.
E) quantity of the crop purchased by domestic users multiplied by the equilibrium price.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: KG
AACSB: Reflective thinking
5) In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium
quantity is 100 tons. If the government then imposes a price support of $20 per ton,
A) the market price increases.
B) the market price decreases.
C) marginal cost decreases.
D) consumer surplus increases.
E) the deadweight loss is decreased.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Analytical reasoning
6) When a price support is set below the equilibrium price, producers ________ the quantity
supplied and consumers ________ the quantity demanded.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) do not change; do not change
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: MR
AACSB: Analytical reasoning
66
Copyright © 2011 Pearson Education, Inc.
7) Setting a price support in the market for sugar beets above equilibrium price ________ the
quantity produced and ________ the quantity bought by consumers.
A) decreases; decreases
B) increases; decreases
C) decreases; increases
D) increases; increases
E) does not change; increases
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: KG
AACSB: Analytical reasoning
8) Assume a market is producing efficiently. Which type of government intervention in this
market might create a deadweight loss?
i. a price ceiling
ii. a price floor
iii. a price support
A) i only
B) i and ii
C) iii only
D) ii and iii
E) i, ii, and iii
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: SB
AACSB: Analytical reasoning
9) A price support leads to inefficiency because
A) output is more than the efficient, equilibrium quantity.
B) the marginal benefit of the last unit produced is larger than the marginal cost.
C) the price charged is less than the equilibrium price.
D) producer surplus is less than consumer surplus.
E) producers must pay a subsidy to the government.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Reflective thinking
67
Copyright © 2011 Pearson Education, Inc.
10) Suppose the government imposes a price support that is above the equilibrium price. As a
result,
A) total revenue increases.
B) consumer surplus increases.
C) the marginal cost of the last unit produced decreases.
D) the government has effectively imposed a price ceiling.
E) the subsidy the government pays decreases.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Reflective thinking
11) A market with a price support set above the equilibrium price,
A) consumers gain.
B) taxes on consumers decrease.
C) marginal benefit exceeds marginal cost.
D) is efficient.
E) farmers gain.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: KG
AACSB: Reflective thinking
12) A price support set above the equilibrium price does which of the following?
i. decreases producer surplus
ii. decreases consumer surplus
iii. decreases the marginal cost of the last unit produced
A) i and ii
B) i and iii
C) ii and iii
D) i, ii, and iii
E) ii only
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Reflective thinking
68
Copyright © 2011 Pearson Education, Inc.
13) Suppose the equilibrium price of cotton is $100 per ton. A price support set at ________ than
$100 per ton ________.
A) less; increases producer surplus
B) less; increases consumer surplus
C) more; increases consumer surplus
D) more; decreases marginal cost
E) more; creates a surplus that the government must buy
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Analytical reasoning
14) In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium
quantity is 100 tons. If the government then imposes a price support of $20 per ton,
A) marginal benefit exceeds marginal cost.
B) the market becomes more efficient
C) marginal cost decreases.
D) the government must supply some cotton to offset the shortage that results.
E) marginal cost exceeds marginal benefit.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: CD
AACSB: Analytical reasoning
15) In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium
quantity is 100 tons. If the government then imposes a price support of $5 per ton,
A) a deadweight loss is created.
B) the market becomes more efficient.
C) consumer surplus increases.
D) producers' economic profits increase.
E) None of the above answers is correct.
Skill: Level 2: Using definitions
Section: Checkpoint 7.3
Author: MR
AACSB: Analytical reasoning
69
Copyright © 2011 Pearson Education, Inc.
16) The above figure shows the domestic market for wheat. Suppose this market is isolated from
global competition. The with no government intervention, the equilibrium price is ________ and
the equilibrium quantity is ________.
A) $15 per ton; 100 million tons
B) $14 per ton; 250 million tons
C) $12 per ton; 300 million tons
D) $12 per ton; 250 million tons
E) $15 per ton; 400 million tons
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: KG
AACSB: Analytical reasoning
17) The above figure shows the domestic market for wheat. Suppose this market is isolated from
global competition and the government intervenes by setting a support price of $15 a ton. The
quantity produced once the price support is in place is
A) 400 million tons.
B) 300 million tons.
C) 100 million tons.
D) 250 million tons.
E) 200 million tons.
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: KG
AACSB: Analytical reasoning
70
Copyright © 2011 Pearson Education, Inc.
18) The above figure shows the domestic market for wheat. Suppose this market is isolated from
global competition and the government intervenes by setting a support price of $15 a ton. The
quantity bought by domestic users once the price support is in place is
A) 300 million tons.
B) 400 million tons.
C) 250 million tons.
D) 200 million tons.
E) 100 million tons.
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: KG
AACSB: Analytical reasoning
19) The above figure shows the domestic market for wheat. Suppose this market is isolated from
global competition and the government intervenes by setting a support price of $15 a ton. To
keep the price at this level, the government will ________ million tons of wheat.
A) purchase 300
B) sell 400;
C) purchase 100
D) purchase 250
E) sell 300
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: KG
AACSB: Analytical reasoning
20) The above figure shows the domestic market for wheat. Suppose this market is isolated from
global competition and the government intervenes by setting a support price of $15 a ton. As a
result of this price support, the total subsidy paid to wheat farmers equals
A) $4 billion.
B) $3 billion.
C) $3.5 billion.
D) $1.5 billion.
E) $4.5 billion
Skill: Level 3: Using models
Section: Checkpoint 7.3
Author: KG
AACSB: Analytical reasoning
