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Price floors
67. If a binding price floor is imposed on the video game market, then
a.
the quantity of video games demanded will decrease.
b.
the quantity of video games supplied will increase.
c.
a surplus of video games will develop.
d.
All of the above are correct.
68. If a binding price floor is imposed on the market for eBooks, then
a.
the demand for eBooks will decrease.
b.
the supply of eBooks will increase.
c.
a surplus of eBooks will develop.
d.
All of the above are correct.
69. Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube.
As a result of the price floor, the
a.
demand curve for toothpaste shifts to the left.
b.
supply curve for toothpaste shifts to the right.
c.
quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.
d.
quantity supplied of toothpaste stays the same.
70. Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube.
As a result of the price floor,
a.
quantity demanded decreases.
b.
quantity supplied increases.
c.
there is a surplus.
d.
All of the above are correct.
71. When a binding price floor is imposed on a market to benefit sellers,
a.
every seller in the market benefits.
b.
all buyers and sellers benefit.
c.
every seller who wants to sell the good will be able to do so, but only if he appeals to the personal biases of the
buyers.
d.
some sellers will not be able to sell any amount of the good.
72. A binding price floor will reduce a firm's total revenue
a.
always.
b.
when demand is elastic.
c.
when demand is inelastic.
d.
never.
73. Refer to Figure 6-17. A government-imposed price of $24 in this market is an example of a
a.
binding price ceiling that creates a shortage.
b.
non-binding price ceiling that creates a shortage.
c.
binding price floor that creates a surplus.
d.
non-binding price floor that creates a surplus.
74. Refer to Figure 6-17. A government-imposed price of $12 in this market is an example of a
a.
binding price ceiling that creates a shortage.
b.
non-binding price ceiling that creates a shortage.
c.
binding price floor that creates a surplus.
d.
non-binding price floor that creates a surplus.
Figure 6-3
Panel (a)
Panel (b)
75. Refer to Figure 6-3. A binding price floor is shown in
a.
both panel (a) and panel (b).
b.
panel (a) only.
c.
panel (b) only.
d.
neither panel (a) nor panel (b).
76. Refer to Figure 6-3. A nonbinding price floor is shown in
a.
both panel (a) and panel (b).
b.
panel (a) only.
c.
panel (b) only.
d.
neither panel (a) nor panel (b).
77. Refer to Figure 6-3. In panel (b), there will be
a.
a shortage.
b.
equilibrium in the market.
c.
a surplus.
d.
lines of people waiting to buy the good.
78. Refer to Figure 6-3. In panel (a), there will be
a.
a shortage.
b.
equilibrium in the market.
c.
a surplus.
d.
lines of people waiting to buy the good.
79. An outcome that can result from either a price ceiling or a price floor is
a.
a surplus in the market.
b.
a shortage in the market.
c.
a nonbinding price control.
d.
long lines of frustrated buyers.
80. An outcome that can result from either a price ceiling or a price floor is
a.
an enhancement of efficiency.
b.
undesirable rationing mechanisms.
c.
a surplus.
d.
a shortage.
81. Price ceilings and price floors that are binding
a.
are desirable because they make markets more efficient and more fair.
b.
cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.
c.
can have the effect of restoring a market to equilibrium.
d.
are imposed because they can make the poor in the economy better off without causing adverse effects.
82. When government imposes a price ceiling or a price floor on a market,
a.
price no longer serves as a rationing device.
b.
efficiency in the market is enhanced.
c.
shortages and surpluses are eliminated.
d.
both buyers and sellers become better off.
83. You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of
Sylvania has cut off all exports of oranges to Freedonia. George, who is one of your advisors, says that the best way to
avoid a shortage of oranges is to take no action at all. Charles, another one of your advisors, argues that without a binding
price floor, a shortage will certainly develop. Otto, a third advisor, suggests that you should impose a binding price ceiling
in order to avoid a shortage of oranges. Which of your three advisors is most likely to have studied economics?
a.
George
b.
Charles
c.
Otto
d.
Apparently, all three advisors have studied economics, but their views on positive economics are different.
84. When policymakers set prices by legal decree, they
a.
are usually following the advice of mainstream economists.
b.
improve the organization of economic activity.
c.
obscure the signals that normally guide the allocation of society’s resources.
d.
are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.
85. Consider the market for gasoline. Buyers
a.
and sellers would lobby for a price ceiling.
b.
and sellers would lobby for a price floor.
c.
would lobby for a price ceiling, whereas sellers would lobby for a price floor.
d.
would lobby for a price floor, whereas sellers would lobby for a price ceiling.
Figure 6-4
86. Refer to Figure 6-4. Which of the following statements is not correct?
a.
When the price is $10, quantity supplied equals quantity demanded.
b.
When the price is $6, there is a surplus of 8 units.
c.
When the price is $12, there is a surplus of 4 units.
d.
When the price is $16, quantity supplied exceeds quantity demanded by 12 units.
87. Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a
(i)
binding price ceiling.
(ii)
non-binding price ceiling.
(iii)
binding price floor.
(iv)
non-binding price floor.
a.
(i) only
b.
(ii) only
c.
(i) and (iv) only
d.
(ii) and (iii) only
88. Refer to Figure 6-4. A government-imposed price of $16 in this market could be an example of a
(i)
binding price ceiling.
(ii)
non-binding price ceiling.
(iii)
binding price floor.
(iv)
non-binding price floor.
a.
(i) only
b.
(ii) only
c.
(i) and (iv) only
d.
(ii) and (iii) only
89. Refer to Figure 6-4. A government-imposed price of $12 in this market is an example of a
a.
binding price ceiling that creates a shortage.
b.
non-binding price ceiling that creates a shortage.
c.
binding price floor that creates a surplus.
d.
non-binding price floor that creates a surplus.
90. Refer to Figure 6-4. A government-imposed price of $6 in this market is an example of a
a.
binding price ceiling that creates a shortage.
b.
non-binding price ceiling that creates a shortage.
c.
binding price floor that creates a surplus.
d.
non-binding price floor that creates a surplus.
91. Refer to Figure 6-4. A government-imposed price ceiling of $6 in this market results in
a.
a shortage of 8 units.
b.
a shortage of 4 units.
c.
14 units sold.
d.
10 units sold.
92. Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in
a.
a surplus of 2 units.
b.
a surplus of 4 units.
c.
12 units sold.
d.
10 units sold.
Figure 6-5
93. Refer to Figure 6-5. If the solid horizontal line on the graph represents a price ceiling, then the price ceiling is
a.
binding and creates a surplus of 60 units of the good.
b.
binding and creates a surplus of 20 units of the good.
c.
not binding but creates a surplus of 40 units of the good.
d.
not binding, and there will be no surplus or shortage of the good.
94. Refer to Figure 6-5. If the solid horizontal line on the graph represents a price floor, then the price floor is
a.
binding and creates a surplus of 60 units of the good.
b.
binding and creates a surplus of 20 units of the good.
c.
binding and creates a surplus of 40 units of the good.
d.
not binding, and there will be no surplus or shortage of the good.
95. Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as
represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control
a.
causes the quantity demanded to decrease by 50 units, relative to the initial equilibrium.
b.
causes the quantity supplied to increase by 40 units, relative to the initial equilibrium.
c.
means that some firms will not be able to sell all that they want
d.
All of the above are correct.
96. Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes
a.
quantity demanded to decrease by 40 units.
b.
quantity supplied to increase by 20 units.
c.
a surplus of 60 units.
d.
All of the above are correct.
Figure 6-6
97. Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?
a.
$8
b.
$6
c.
$12
d.
$10
98. Refer to Figure 6-6. Which of the following price floors would be binding in this market?
a.
$6
b.
$8
c.
$10
d.
$4
99. Refer to Figure 6-6. Which of the following statements is correct?
a.
A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding.
b.
A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding.
c.
A price ceiling set at $9 would result in a surplus.
d.
A price floor set at $11 would result in a surplus.
100. Refer to Figure 6-6. Which of the following statements is not correct?
a.
A price ceiling set at $6 would be binding, but a price ceiling set at $12 would not be binding.
b.
A price floor set at $14 would be binding, but a price floor set at $8 would not be binding.
c.
A price ceiling set at $9 would result in a surplus.
d.
A price floor set at $6 would result in a shortage.
101. Refer to Figure 6-6. If the government imposes a price ceiling of $8 on this market, then there will be
a.
no shortage.
b.
a shortage of 10 units.
c.
a shortage of 20 units.
d.
a shortage of 40 units.
102. Refer to Figure 6-6. If the government imposes a price ceiling of $6 on this market, then there will be
a.
no shortage.
b.
a shortage of 10 units.
c.
a shortage of 20 units.
d.
a shortage of 30 units.
103. Refer to Figure 6-6. If the government imposes a price floor of $6 on this market, then there will be
a.
no surplus.
b.
a surplus of 20 units.
c.
a surplus of 30 units.
d.
a surplus of 40 units.
104. Refer to Figure 6-6. If the government imposes a price floor of $10 on this market, then there will be
a.
no surplus.
b.
a surplus of 20 units.
c.
a surplus of 30 units.
d.
a surplus of 10 units.
105. Refer to Figure 6-6. In which of the following cases would sellers have to develop a rationing mechanism?
a.
a price ceiling set at $8
b.
a price ceiling set at $6
c.
a price floor set at $8
d.
a price floor set at $6
Figure 6-7
106. Refer to Figure 6-7. For a price ceiling to be binding in this market, it would have to be set at
a.
any price below $7.
b.
any price above $3.
c.
any price below $9.
d.
any price above $7.
107. Refer to Figure 6-7. For a price floor to be binding in this market, it would have to be set at
a.
any price below $7.
b.
any price below $3.
c.
any price below $9.
d.
any price above $7.
108. Refer to Figure 6-7. Which of the following price controls would cause a shortage of 20 units of the good?
a.
a price ceiling set at $6
b.
a price ceiling set at $5
c.
a price floor set at $9
d.
a price floor set at $8
109. Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?
a.
a price ceiling set at $6
b.
a price ceiling set at $5
c.
a price floor set at $9
d.
a price floor set at $8
110. Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,
a.
the quantity of the good supplied decreases by 20 units.
b.
the demand curve shifts to the left; quantity sold is now 30 units and the price is $5.
c.
buyers’ total expenditure on the good decreases by $80.
d.
the price of the good continues to serve as the rationing mechanism.
111. Refer to Figure 6-7. Suppose a price floor of $8 is imposed on this market. As a result,
a.
buyers’ total expenditure on the good decreases by $20.
b.
the supply curve shifts to the left; quantity sold is now 30 units and the price is $8.
c.
the quantity of the good demanded decreases by 10 units.
d.
the price of the good continues to serve as the rationing mechanism.
Figure 6-8
112. Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be
a.
no shortage of the good.
b.
a shortage of 10 units of the good.
c.
a shortage of 20 units of the good.
d.
a shortage of 30 units of the good.
113. Refer to Figure 6-8. If the government imposes a price floor of $5 on this market, then there will be
a.
no surplus of the good.
b.
a surplus of 5 units of the good.
c.
a surplus of 10 units of the good.
d.
a surplus of 15 units of the good.
114. Refer to Figure 6-8. The price of the good would continue to serve as the rationing mechanism if
a.
a price ceiling of $3 is imposed.
b.
a price ceiling of $5 is imposed.
c.
a price floor of $5 is imposed.
d.
All of the above are correct.
115. Refer to Figure 6-8. When a certain price control is imposed on this market, the resulting quantity of the good that is
actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity
and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 - P2 = $3, then the price
control is
a.
a price ceiling of $2.00.
b.
a price ceiling of $5.00.
c.
a price floor of $5.00.
d.
either a price ceiling of $2.00 or a price floor of $5.00.
Figure 6-9
116. Refer to Figure 6-9. A price ceiling set at
a.
$4 will be binding and will result in a shortage of 8 units.
b.
$4 will be binding and will result in a shortage of 16 units.
c.
$7 will be binding and will result in a surplus of 4 units.
d.
$7 will be binding and will result in a surplus of 8 units.
117. Refer to Figure 6-9. At which price would a price ceiling be binding?
a.
$8
b.
$5
c.
$6
d.
$7
118. Refer to Figure 6-9. At which price would a price ceiling be nonbinding?
a.
$4
b.
$5
c.
$3
d.
$7
119. Refer to Figure 6-9. A price floor set at
a.
$4 will be binding and will result in a shortage of 8 units.
b.
$4 will be binding and will result in a shortage of 16 units.
c.
$7 will be binding and will result in a surplus of 4 units.
d.
$7 will be binding and will result in a surplus of 8 units.
120. Refer to Figure 6-9. At which price would a price floor be binding?
a.
$7
b.
$6
c.
$4
d.
$5
121. Refer to Figure 6-9. At which price would a price floor be nonbinding?
a.
$8
b.
$7
c.
$6
d.
$9
Figure 6-10
122. Refer to Figure 6-10. A price ceiling set at
a.
$6 will be binding and will result in a shortage of 10 units.
b.
$6 will be binding and will result in a shortage of 6 units.
c.
$16 will be binding and will result in a shortage of 10 units.
d.
$16 will be binding and will result in a shortage of 4 units.
123. Refer to Figure 6-10. A price floor set at
a.
$6 will be binding and will result in a surplus of 10 units.
b.
$6 will be binding and will result in a surplus of 6 units.
c.
$16 will be binding and will result in a surplus of 10 units.
d.
$16 will be binding and will result in a surplus of 4 units.
