Page 1
1.
A price control is:
A)
control of the price of a good by the firm that produces it.
B)
a legal restriction on how high or low a price in a market may go.
C)
an upper limit on the quantity of some good that can be bought or sold.
D)
a tax on the sale of a good that controls the market price.
Use the following to answer questions 2-10:
Figure: Rent Controls
2.
(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the
equilibrium quantity is:
A)
Q4.
B)
Q1.
C)
Q2.
D)
Q3.
3.
(Figure: Rent Controls) Look at the figure Rent Controls. Suppose that rent controls are
imposed. If the government wanted a rent control ceiling to be effective immediately,
what is one possible price to set?
A)
Rent3
B)
Rent4
C)
Rent1
D)
Rent2
Page 2
4.
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at
Rent0, renters would be willing to pay a price at least as high as:
A)
Rent4 for Q0 units.
B)
Rent4 for Q1 units.
C)
Rent3 for Q1 units.
D)
No one would be willing to pay a higher actual price than Rent0.
5.
(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the
equilibrium rent is:
A)
Rent4.
B)
Rent1.
C)
Rent2.
D)
Rent3.
6.
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are imposed
and the government wants them to be immediately effective, they will most likely be set
at either _____ or _____.
A)
Rent0; Rent1
B)
Rent1; Rent3
C)
Rent3; Rent4
D)
Rent2; Rent4
7.
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at
Rent0:
A)
the shortage of rental units is the distance Q1 – Q3.
B)
some renters will be willing to pay a price as high as Rent4 for Q0 units.
C)
no one will have to pay a higher actual price than Rent0, nor will anyone be willing
to do so.
D)
there will be a surplus of rental units.
8.
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at
Rent1:
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 Q1 units.
C)
no one will have to pay a higher actual price than Rent0, nor will anyone be willing
to do so.
D)
there will be a surplus of rental units, but it is impossible to tell how large the
surplus is based on the information provided.
Page 3
9.
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at
Rent3:
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.
10.
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at
Rent1:
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.
11.
The market for apples is in equilibrium at a price of $0.50 per pound. If the government
imposes a price floor in the market at a price of $0.40 per pound:
A)
quantity demanded will decrease.
B)
quantity supplied will increase.
C)
there will be a shortage of apples.
D)
the price floor will not affect the market price or output.
12.
A binding price ceiling is designed to:
A)
keep prices below the equilibrium level.
B)
increase the quality of the good.
C)
prevent shortages.
D)
increase efficiency.
13.
Rapidly increasing health costs have been a major political concern since at least 1992.
Suppose the government sets the maximum price for a normal doctor visit at $20 to
control rising health costs but the current market price is $40. What will happen?
A)
More people will try to visit the doctor, but there will be fewer doctors willing to
see patients at that price.
B)
The same number of people will try to visit the doctor, and the same number of
doctors are willing to see patients at that price.
C)
More people will be able to see the doctor, since the price is lower.
D)
Fewer people will try to see the doctor, and fewer doctors are willing to see
patients at that price.
Page 4
14.
The government decides to impose a price ceiling on a good because it thinks the
market-determined price is too high. If the government imposes the price ceiling below
the equilibrium price:
A)
consumers will respond to the lower price and wish to purchase more of the good
than at the equilibrium price.
B)
producers will respond to the lower price and offer more units for sale.
C)
consumers will be able to purchase more of the good after the price ceiling is
imposed.
D)
it will not be binding.
15.
The government imposes a price ceiling below the equilibrium price. The price ceiling
will cause:
A)
demand to decrease.
B)
supply to increase.
C)
a shortage of the good.
D)
an increase in the quality of the good.
16.
The NFL wants to give the “common fan” the opportunity to attend the Super Bowl, so
it sets Super Bowl prices “low”—tickets for a regular seat at Super Bowl XXXVII cost
just $400. Scalpers, however, sell tickets for $1,500 or more. If there are no transaction
costs to selling a ticket, the true cost of a regular ticket to Super Bowl XXXVII is:
A)
at most $400.
B)
at least $1,500.
C)
the monetary price paid to obtain the ticket.
D)
$1,100 less than the opportunity cost of a ticket.
17.
Rent controls set a price ceiling below the equilibrium price, and therefore:
A)
quantity supplied exceeds the quantity demanded.
B)
quantity demanded exceeds the quantity supplied.
C)
a surplus of rental units will result.
D)
all poor people will be helped.
18.
A price ceiling will have NO effect if:
A)
it is set above the equilibrium price.
B)
the equilibrium price is above the price ceiling.
C)
it is set below the equilibrium price.
D)
it creates a shortage.
Page 5
Use the following to answer questions 19-23:
19.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
does not impose a price control, the price of a can of soda will equal:
A)
$0.50.
B)
$0.75.
C)
$1.00.
D)
$1.25.
20.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be:
A)
10 cans.
B)
8 cans.
C)
6 cans.
D)
4 cans.
21.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
imposes a price ceiling of $0.50 per can of soda, there will be:
A)
a shortage of two cans.
B)
a shortage of three cans.
C)
a surplus of three cans.
D)
equilibrium in the market for soda.
22.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
imposes a price ceiling of $1 per can of soda, the quantity of soda supplied will be:
A)
7 cans.
B)
8 cans.
C)
9 cans.
D)
10 cans.
Page 6
23.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
imposes a price ceiling of $1 per can of soda, the quantity of soda demanded will be:
A)
10 cans.
B)
8 cans.
C)
6 cans.
D)
4 cans.
Use the following to answer question 24:
24.
(Table: Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. In
response to popular anger over the high price of fried Twinkies and the extreme wealth
of fried Twinkie producers, the government imposes a price ceiling of $1.20 per fried
Twinkie. From this table, the price ceiling causes a _____ fried Twinkies.
A)
shortage of 3,000
B)
shortage of 5,000
C)
surplus of 8,000
D)
surplus of 3,000
Page 7
Use the following to answer questions 25-27:
Table: Market for Apartments
25.
(Table: Market for Apartments) Look at the 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.
A)
surplus of 0.6
B)
shortage of 0.6
C)
surplus of 0.2
D)
shortage of 0.2
26.
(Table: Market for Apartments) Look at the table Market for Apartments. If a price
ceiling of $900 is imposed on this market, the result will be an inefficiency in the form
of a _____ million apartments.
A)
surplus of 0.6
B)
shortage of 0.6
C)
surplus of 0.2
D)
shortage of 0.2
27.
(Table: Market for Apartments) Look at the table Market for Apartments. If a
government price ceiling of $600 is imposed on this market, the result will be an
inefficiency in the form of a _____ million apartments.
A)
surplus of 0.6
B)
surplus of 0.8
C)
shortage of 0.8
D)
shortage of 0.6
Page 8
28.
Suppose the Jamaican government sets coffee prices at $1 per pound, when the market
price is $10. The government’s actions will:
A)
improve efficiency, since the low prices will force producers to find cheaper
production methods.
B)
result in coffee surpluses even in a coffee-rich country.
C)
cause coffee shortages even in a coffee-rich country.
D)
improve equality between rich and poor, since the poor can now afford coffee.
29.
Suppose that the average cost of a doctor visit is $100. If the government imposes a
price ceiling of $50 on the cost of a doctor visit, there will be:
A)
an excess supply of doctor visits.
B)
an excess demand for doctor visits.
C)
an increase in the equilibrium number of doctor visits.
D)
no change in the number of doctor visits.
30.
The most likely reason that the government implements a _____ is because it feels the
price is too high for _____.
A)
price ceiling; consumers
B)
price floor; consumers
C)
price ceiling; producers
D)
price floor; producers
31.
The government decides to impose a price ceiling on a good because it thinks the
market-determined price is too high. If it imposes the price ceiling above the
equilibrium price:
A)
consumers will respond to the higher price and therefore wish to purchase less of
the good than at the equilibrium price.
B)
producers will respond to the higher price and therefore offer fewer units for sale.
C)
consumers will purchase less of the good after the price ceiling is imposed.
D)
neither producers nor consumers will change their behavior.
32.
The market for apples is in equilibrium at a price of $0.50 per pound. If the government
imposes a price ceiling in the market at $0.40 per pound:
A)
quantity demanded will decrease.
B)
quantity supplied will increase.
C)
there will be a shortage of the good.
D)
the price ceiling will not affect the market price or output.
Page 9
33.
To be binding, a price ceiling must be set at a price:
A)
lower than the equilibrium price.
B)
higher than the equilibrium price.
C)
the same as the equilibrium price.
D)
Any price ceiling is binding.
34.
A maximum price set below the equilibrium price is a:
A)
demand price.
B)
supply price.
C)
price floor.
D)
price ceiling.
35.
A price ceiling is:
A)
a maximum price sellers are allowed to charge for a good or service.
B)
the difference between the quantity supplied and quantity demanded.
C)
a minimum price buyers are required to pay for a good or service.
D)
the deadweight loss caused by an inefficiently low quantity.
Use the following to answer question 36:
Figure: Price Control
36.
(Figure: Price Control) Look at the figure Price Control. One effective price ceiling
would be the price indicated at point _____, and there would be a _____ equal to the
difference between points _____.
A)
b; surplus; f and e
B)
b; shortage; f and e
C)
d; shortage; i and h
D)
d; surplus; e and h
Page 10
37.
The dictator of a small country restricts the price of cars to an amount less than or equal
to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:
A)
price floor.
B)
price ceiling.
C)
quota.
D)
tariff.
38.
A student organization is formed on your college campus to protest against the high rent
for apartments near campus. This organization is planning a meeting with the dean and
president of the college. Which of the following best describes the policy the student
organization will fight for?
A)
a laissez faire policy
B)
a price floor
C)
a price ceiling
D)
a quantity control
39.
Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil
products, which remain the keystone of Venezuela’s economy. Suppose President
Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a
government policy to reduce the price of gasoline sold at state-owned gas stations to 50
percent of the previous price. This policy is called a:
A)
laissez faire policy.
B)
price floor.
C)
price ceiling.
D)
quota.
40.
Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil
products, which remain the keystone of Venezuela’s economy. Suppose President
Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a
government policy to reduce the price of gasoline sold at state-owned gas stations to
50% of the previous price. Assuming a downward-sloping demand curve for gasoline, in
theory, this policy would result in the quantity of gasoline demanded to be _____ the
quantity of gasoline supplied.
A)
equal to
B)
greater than
C)
less than
D)
greater than or equal to
Page 11
Use the following to answer question 41:
Figure: The Market for Hybrid Cars
41.
(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. If
there were a binding price ceiling in the market for hybrid cars, one possible price
would be equal to _____; consumers would demand _____; and producers would supply
_____.
A)
P1; Q1; Q3
B)
P2; Q2; Q2
C)
P1; Q3; Q1
D)
P3; Q3; Q1
Page 12
Use the following to answer questions 42-43:
Figure: The Market for Economics Textbooks
42.
(Figure: The Market for Economics Textbooks) Look at the figure The Market for
Economics Textbooks. Suppose the government believes textbooks are too expensive
and it wants to make sure textbooks are affordable to more students. This type of price
control is called a price _____, and one possible binding price control would be _____.
A)
floor; $100
B)
floor; $40
C)
ceiling; $40
D)
ceiling; $100
43.
(Figure: The Market for Economics Textbooks) Look at the figure The Market for
Economics Textbooks. At a price ceiling of $40, the market outcome would be a _____
of _____ textbooks.
A)
surplus; 30
B)
surplus; 10
C)
shortage; 30
D)
shortage; 10
Page 13
44.
When price controls take the form of maximum prices set below the equilibrium price,
they are:
A)
illegal.
B)
equal to the demand price.
C)
price floors.
D)
price ceilings.
45.
A maximum price legislated by the government is called:
A)
a price support.
B)
a price floor.
C)
a price ceiling.
D)
the parity price.
46.
A persistent shortage may occur if:
A)
the government imposes a price ceiling.
B)
the government imposes a price floor.
C)
demand keeps falling.
D)
supply shifts rightward.
47.
If the government sets out to help low-income people by establishing a maximum
amount that can be paid for rent:
A)
a price floor has been set, and a shortage of rental units may occur.
B)
a price ceiling has been set, and a shortage of rental units may occur.
C)
in the long run more rental units will appear.
D)
the quality of rental units will be inefficiently high.
48.
Rent controls usually set a ceiling below the equilibrium price, and therefore:
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.
49.
A price ceiling is not effective if:
A)
it is set above the equilibrium price.
B)
the equilibrium price is above the price ceiling.
C)
it is set below the equilibrium price.
D)
it creates a shortage.
Page 14
Use the following to answer question 50:
50.
(Table: Market for Butter) Look at the table Market for Butter. If the government
imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually
purchased will be:
A)
10.5 million pounds.
B)
9.0 million pounds.
C)
1.5 million pounds.
D)
10.0 million pounds.
Use the following to answer questions 51-53:
Figure: Supply and Demand
51.
(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of
P1 causes:
A)
a shortage equal to the distance AB.
B)
a surplus equal to the distance AB.
C)
a shortage equal to the distance DE.
D)
no change to the market.
Page 15
52.
(Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of
P3 causes:
A)
a shortage equal to the distance AB.
B)
a surplus equal to the distance AB.
C)
a shortage equal to the distance DE.
D)
no change to the market.
53.
(Figure: Supply and Demand) Look at the figure Supply and Demand. A binding price
ceiling is represented by:
A)
the price P1.
B)
the price P2.
C)
the price P3.
D)
point C.
54.
The Atlanta Symphony wants to make sure that its concerts are affordable for all
residents of Atlanta and therefore prices all of its tickets at $25. However, outside
Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the
concertgoer of a ticket to the symphony is at least:
A)
$25.
B)
$50.
C)
$75.
D)
$100.
55.
Producers will supply an inefficiently low quality of a good if the government imposes:
A)
a price control.
B)
an excise tax.
C)
a binding price floor.
D)
a binding price ceiling.
56.
If the government imposes binding rent control:
A)
rent will be set above the equilibrium price.
B)
it may result in some landlords leaving the business because they cannot cover
costs.
C)
it will lead to rental units being higher in quality because landlords are guaranteed
a high price.
D)
it will cause a surplus of housing.
Page 16
57.
Price ceilings will impose costs on society because they:
A)
will eliminate long waiting lines.
B)
may result in black market prices, which are lower than the market-determined
price would be.
C)
lead to a smaller quantity offered on the market.
D)
help businesses instead of consumers.
58.
By definition, in a black market, goods or services are bought and sold:
A)
at night.
B)
without any information about quality.
C)
without any information about price.
D)
illegally.
59.
When a tenant in a rent-controlled apartment sublets the apartment to another renter at a
rent higher than the price ceiling:
A)
it is inefficient.
B)
the transaction takes place on a black market.
C)
there is an increase in quantity demanded.
D)
there is a decrease in quantity demanded.
60.
Black markets may develop as a result of price controls because:
A)
price controls increase efficiency.
B)
quantity demanded equals quantity supplied at the mandated price.
C)
individuals cannot profit by illegal exchanges.
D)
individuals can profit by illegal exchanges.
61.
Which of the following is an example of a black market transaction?
A)
a tenant in a rent-controlled apartment subletting at a higher rent
B)
the purchase of an inferior radio at a department store
C)
waiting in line during the gasoline shortages of the 1970s
D)
the oil market
62.
In a(n) _____ market goods or services are bought and sold illegally.
A)
black
B)
uncontrolled
C)
unregulated
D)
unproductive
Page 17
63.
One of the ways rent control is inefficient is that it leads to:
A)
higher-quality apartments.
B)
high opportunity costs associated with wasted time searching for apartments.
C)
markets that maximize total surplus.
D)
the construction of more apartments.
64.
Rent controls in New York City cause all of the following EXCEPT:
A)
inefficiently low-quality apartments.
B)
wasted resources resulting from the opportunity cost of time associated with trying
to find an apartment.
C)
black markets.
D)
an increase in the quantity supplied of rent-controlled apartments.
65.
Price controls encourage black markets because:
A)
they eliminate opportunity costs.
B)
individuals can profit by illegal exchanges.
C)
they create too much efficiency.
D)
they create too much equity.
66.
Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at
$0.25 per gallon when the market price is $1.50. The Saudi government’s actions will:
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)
improve equality between rich and poor, since the poor can now afford gasoline.
67.
A price ceiling is likely to result in a persistent _____, a transfer of surplus from _____,
and _____ deadweight loss.
A)
surplus; producers to consumers; some
B)
shortage; producers to consumers; some
C)
shortage; consumers to producers; no
D)
surplus; consumers to producers; some
68.
A binding rent-control price ceiling results in all of the following EXCEPT:
A)
inefficiently low quantity of the good exchanged.
B)
wasted resources of consumers caused by time spent searching for the good.
C)
inefficient allocation of the good to consumers.
D)
inefficiently high quality of the good being sold.
Page 18
69.
Which is NOT an inefficiency caused by binding price ceilings?
A)
inefficient allocation to consumers
B)
wasted resources
C)
illegal activity
D)
inefficient allocation of sales among sellers
70.
Economists in general agree that rent controls are:
A)
an efficient and equitable way to help low-income families.
B)
an inefficient but sometimes effective way to help low-income families.
C)
an efficient method of dealing with the shortages caused by price ceilings.
D)
the only way to solve the problem of poverty.
71.
Governments continue to impose price controls. Which of the following is NOT a valid
reason for this?
A)
Some people do benefit from such price controls.
B)
People fear that prices will change dramatically if the price controls are removed.
C)
It is politically expedient to enact regulations that benefit influential voting groups.
D)
Price controls are always effective.
Use the following to answer question 72:
72.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
imposes a price floor of $1 per can of soda, there will be:
A)
a shortage of two cans.
B)
a shortage of three cans.
C)
a surplus of three cans.
D)
equilibrium in the market for soda.
Page 19
73.
West African cotton farmers are very upset about the subsidies the U.S. government
pays to American cotton farmers. One reason for this could be that subsidized cotton
from the United States:
A)
leads to cotton surpluses in the United States and lower prices for West African
farmers on world markets.
B)
raises the world price of cotton.
C)
has led to a global shortage of cotton.
D)
has led to an increase in the demand for West African cotton.
74.
The United States and the European Union impose price floors on many agricultural
products. These price floors lead to unwanted surpluses. To deal with a surplus:
A)
the U.S. government typically pays farmers to produce as much as possible.
B)
the U.S. government in some cases has destroyed the surplus production.
C)
the European Union pays farm exporters to sell products for a profit overseas.
D)
the U.S. government holds auctions to sell the surplus to the highest bidder.
Use the following to answer question 75:
75.
(Table: Market for Butter) Look at the figure Market for Butter. If the government
imposes a price floor of $0.90 per pound of butter, the quantity of butter actually
purchased will be _____ million pounds.
A)
10.5
B)
9.0
C)
1.5
D)
10.0
Page 20
76.
Suppose the government sets a price floor of $2.85 per bushel on corn when the current
price is $2.55. This price floor will:
A)
cause a surplus of corn.
B)
cause a shortage of corn.
C)
have no effect on the price of corn.
D)
increase the supply of corn.
Use the following to answer question 77:
Figure: Supply and Demand
77.
(Figure: Supply and Demand) Look at the figure Supply and Demand. A binding price
floor is represented by:
A)
P1.
B)
P2.
C)
P3.
D)
point C.
78.
All else equal, if a price floor above the equilibrium is imposed on a market and the
government buys the surplus, consumer surplus will _____ and producer surplus will
_____.
A)
fall; rise
B)
fall; fall
C)
rise; fall
D)
rise; rise
Page 21
Use the following to answer questions 79-81:
Figure: The Market for Butter
79.
(Figure: The Market for Butter) Look at the figure The Market for Butter. If a
government price floor at $1.30 is imposed on this market, an inefficiency will result in
the form of a _____ of _____ million pounds of butter.
A)
surplus; 4.5
B)
surplus; 6.0
C)
shortage; 6.0
D)
shortage; 4.5
80.
(Figure: The Market for Butter) Look at the figure The Market for Butter. If a
government price floor at $1.20 is imposed on this market, an inefficiency will result in
the form of a _____ of _____ million pounds of butter.
A)
surplus; 4.5
B)
shortage; 4.5
C)
surplus; 1.5
D)
shortage; 1.5
81.
(Figure: The Market for Butter) Look at the figure The Market for Butter. If a
government price floor at $1.10 is imposed on this market, an inefficiency will result in
the form of a _____ of _____ million pounds of butter.
A)
surplus; 4.5
B)
shortage; 4.5
C)
surplus; 3
D)
shortage; 1.5
Page 22
82.
Which of the following is a reason for governments imposing or maintaining price
controls?
A)
Some consumers and producers can benefit from price controls.
B)
Price controls recapture the deadweight loss of equilibrium.
C)
The government benefits from price controls.
D)
Price controls improve the efficiency of the market.
83.
The most likely reason that the government would implement a _____ is because it feels
that the price is too low for _____.
A)
price ceiling; consumers
B)
price floor; consumers
C)
price ceiling; producers
D)
price floor; producers
84.
To be binding, a price floor must be set:
A)
lower than the equilibrium price.
B)
higher than the equilibrium price.
C)
so that quantity demanded exceeds quantity supplied.
D)
lower than the equilibrium price and so that quantity demanded exceeds quantity
supplied.
85.
When the minimum wage increases:
A)
unemployment among skilled workers decreases.
B)
fewer workers are willing to work off the books.
C)
employment of unskilled workers increases.
D)
unemployment among unskilled workers increases.
86.
Farmers in developing countries want the United States to reduce the subsidies that it
gives to U.S. farmers because subsidized agricultural products from the United States:
A)
lead to agricultural surpluses and lower prices for farmers in developing countries.
B)
raise the world price of agricultural products.
C)
have led to a global shortage of agricultural products.
D)
have led to an increase in the demand for agricultural products from the developing
world.
Page 23
87.
When the government removes a binding price floor:
A)
quantity demanded will decrease and quantity supplied will increase.
B)
quantity demanded will increase and quantity supplied will decrease.
C)
excess demand will develop.
D)
excess supply will develop.
88.
A minimum price set above the equilibrium price is a:
A)
demand price.
B)
supply price.
C)
price floor.
D)
price ceiling.
89.
Suppose the government sets a price floor below the current price of a good. This price
floor will:
A)
result in an excess supply of the good.
B)
result in an excess demand for the good.
C)
have no effect on the price of the good.
D)
increase the quantity supplied of the good.
Use the following to answer question 90:
Figure: The Shrimp Market
Page 24
90.
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
wants to limit shrimp sales to 500 pounds, it can impose a price:
A)
floor of $15.
B)
floor of $10.
C)
ceiling of $10.
D)
floor of $15 or ceiling of $10.
91.
Which of the following is an example of a price floor?
A)
a rent-controlled apartment
B)
a maximum legal price that could be charged for gasoline during a time of war
C)
the minimum wage
D)
a government decree that capped the price of bottled water in the aftermath of a
devastating hurricane
92.
The likely result of a price floor is a _____ of the good at a price _____ the equilibrium
price.
A)
surplus; above
B)
shortage; below
C)
surplus; below
D)
shortage; above
93.
If the minimum wage is a binding price floor:
A)
those who want to work will outnumber the jobs available.
B)
the equilibrium wage will increase.
C)
there will be a job for everyone who is willing to work.
D)
business owners will hire more workers.
Page 25
Use the following to answer question 94:
Figure: The Market for English Textbooks
94.
(Figure: The Market for English Textbooks) Look at the figure The Market for English
Textbooks. With a binding price floor at $90, the market outcome would be a _____ of
_____ textbooks.
A)
surplus; 45
B)
surplus; 30
C)
shortage; 45
D)
shortage; 30
Page 26
Use the following to answer question 95:
Figure: The Market for Milk
95.
(Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding
price floor, the price could be equal to _____, consumers would demand _____, and
producers would supply _____.
A)
P1; Q1; Q3
B)
P2; Q2; Q2
C)
P1; Q3; Q1
D)
P3; Q3; Q1
Use the following to answer question 96:
Figure: The Market for Tortillas
Page 27
96.
(Figure: The Market for Tortillas) Look at the figure The Market for Tortillas. With a
nonbinding price floor, the price could be equal to _____, consumers would demand
_____, and producers would supply _____.
A)
P1; Q1; Q3
B)
P2; Q2; Q2
C)
P1; Q3; Q1
D)
P3; Q2; Q1
Use the following to answer question 97:
Figure: The Market for Spanish Textbooks
97.
(Figure: The Market for Spanish Textbooks) Look at the figure The Market for Spanish
Textbooks. Suppose the government believes the producers of Spanish textbooks are not
profitable and it wants to make sure textbook producers are profitable. It could impose a
control called a _____, and for it to be binding, one possible price would be _____.
A)
price floor; $90
B)
price floor; $40
C)
price ceiling; $40
D)
price ceiling; $90
Page 28
98.
A binding price floor is a _____ set _____ the equilibrium price.
A)
minimum price; at
B)
maximum price; below
C)
minimum price; above
D)
maximum price; above
99.
A binding price floor in the market for wheat:
A)
increases the price paid by consumers.
B)
decreases the price paid by consumers.
C)
decreases the price received by farmers.
D)
does not change the price received by farmers.
100.
A minimum price that the government guarantees farmers will receive for a particular
crop is:
A)
a price ceiling.
B)
a price floor (price support).
C)
a deficiency price.
D)
an export price (export subsidy).
Use the following to answer questions 101-102:
Figure: Supply and Demand in Agriculture
Page 29
101.
(Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in
Agriculture. The government could help increase farmers’ income by setting a price
_____ at _____, causing a _____ of _____.
A)
floor; P4; surplus; Q3 – Q0
B)
floor; P2; surplus; Q2 – Q0
C)
ceiling; P4; surplus; Q2 – Q1
D)
floor; P1; shortage; Q3 – Q0
102.
(Figure: Supply and Demand in Agriculture) Look at the figure Supply and Demand in
Agriculture. If a price floor at P4 is set to help improve farm incomes and the
government wants to assure farmers that their output will be purchased, the government
must purchase an amount of output equal to:
A)
Q3 – Q0.
B)
Q3 – Q1.
C)
Q2 – Q1.
D)
Q1 – Q3.
103.
An agricultural market price support policy establishes a binding price floor, which:
A)
decreases the price paid by consumers.
B)
does not change the price paid by consumers.
C)
increases the price received by farmers.
D)
decreases the price received by farmers.
Use the following to answer questions 104-106:
Figure: Price Controls
Page 30
104.
(Figure: Price Controls) Look at the graph Price Controls. An effective price floor
would be at price _____ and a _____ would result from the difference between points
_____.
A)
c; surplus; f and e
B)
b; surplus; f and e
C)
d; shortage; i and h
D)
b; shortage; f and e
105.
(Figure: Price Controls) Look at the graph Price Controls. The consumer surplus lost to
a price floor at point b is equal to the area:
A)
abe.
B)
egh.
C)
bcge.
D)
bcke.
106.
(Figure: Price Controls) Look at the graph Price Controls. A price floor has been set at
point b. The area of deadweight loss that results from this price floor is:
A)
egh.
B)
ghi.
C)
fgi.
D)
efg.
107.
The persistent unwanted surplus that results from a price floor causes inefficiencies that
include all of the following EXCEPT:
A)
inefficiently low quality.
B)
inefficient allocation of sales among sellers.
C)
wasted resources.
D)
the temptation to break the law by selling below the legal price.
108.
A binding price floor causes:
A)
a shortage in the market.
B)
a surplus in the market.
C)
wasted resources.
D)
a surplus in the market and wasted resources.
Page 31
109.
Suppose that a binding price floor is in place in a particular market. If the market is
deregulated and the price floor is removed:
A)
the quantity demanded will decrease and the quantity supplied will increase.
B)
excess demand will develop.
C)
the quality of the good supplied will decrease.
D)
the quality of the good supplied will improve.
110.
One of the consequences of the minimum wage has been:
A)
decreased unemployment for low-skill workers.
B)
workers offering to work off the books for less than the minimum wage.
C)
lower production costs for small businesses.
D)
increased employment for high-skill workers.
111.
Price controls:
A)
always increase economic efficiency.
B)
always lead to more equitable results.
C)
can result in inequitable outcomes.
D)
are always set below the equilibrium price.
112.
Producers may supply a good with inefficiently high quality if the government imposes:
A)
a price ceiling set above the equilibrium price.
B)
a price floor set below the equilibrium price.
C)
a binding price floor.
D)
a binding price ceiling.
113.
In Europe the minimum wage has led to:
A)
lower unemployment, especially among young workers.
B)
a proliferation of large companies in Italy.
C)
widespread evasion of the minimum wage law in the black market for labor.
D)
European governments hiring the surplus of workers.
114.
A price floor is likely to cause deadweight loss because:
A)
buyers incur additional search costs looking for the scarce good.
B)
the quantity of the good is less than the equilibrium quantity.
C)
a black market emerges and the good sells at prices above the price floor.
D)
some buyers who want to buy at the controlled price are unable to find a seller
willing to sell at that price.
Page 32
115.
Which is NOT an inefficiency caused by price floors?
A)
inefficiently low quality
B)
inefficient allocation of sales among sellers
C)
wasted resources
D)
illegal activity
Use the following to answer questions 116-117:
Figure: The Market for Hybrid Cars
116.
(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars.
What area represents consumer surplus if there is a binding price floor at P1?
A)
a
B)
a + b
C)
a + b + c
D)
a + b + d
117.
(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars.
What area represents deadweight loss if there is a binding price floor at P1?
A)
a + b + c
B)
b + c + d + e
C)
c + e
D)
c
118.
The system of taxicab medallions in New York City is an example of a:
A)
price ceiling.
B)
nonbinding price ceiling.
C)
price floor.
D)
quantity control.
Page 33
119.
When the government policy is to regulate the quantity of a good that can be bought and
sold rather than the price at which it is transacted, it uses a:
A)
quota.
B)
price control.
C)
price ceiling.
D)
price floor.
120.
A quota is:
A)
a lower limit on quantity.
B)
an upper limit on quantity.
C)
a maximum price.
D)
a minimum price.
121.
The total amount of the good that can be transacted under a quantity control is called
the:
A)
ceiling price.
B)
demand price.
C)
quota limit.
D)
supply price.
122.
Which of the following is a quantity control?
A)
the Medicare reimbursement schedule for physicians
B)
the minimum wage
C)
unemployment insurance
D)
limits on the number of red snappers that can be caught in the Gulf of Mexico
123.
The purpose of medallions issued in New York City in the 1930s was to:
A)
limit the number of people who used the subway during rush hour.
B)
ensure that taxicabs met standards of safety and cleanliness.
C)
give the owner the right to buy and sell securities on the New York Stock
Exchange.
D)
encourage citizens to buy their own cars.
124.
Typically the government limits the quantity of a good that can be bought and sold by:
A)
licensing the suppliers.
B)
setting a price floor below the equilibrium price.
C)
maintaining the equilibrium price regardless of changes in demand and supply.
D)
setting a price ceiling above the equilibrium price.
Page 34
125.
Which of the following is a quota?
A)
rent controls in New York City
B)
property taxes on beachfront property in Florida
C)
limits on the number of bushels of clams that can be caught in New Jersey
D)
the maximum reimbursement that insurance will pay for a medical procedure
126.
The amount that consumers are willing to pay for the quota limit quantity is the:
A)
demand price.
B)
supply price.
C)
quota rent.
D)
price ceiling.
127.
The amount for which suppliers are willing to supply the quota limit quantity is the:
A)
demand price.
B)
supply price.
C)
quota rent.
D)
price floor.
128.
The difference between the demand price and the supply price at the quota limit amount
is the:
A)
demand price.
B)
supply price.
C)
quota rent.
D)
price floor.
129.
When the government imposes a quota on sales of a good or service, it usually licenses
the right to sell a given quantity of the good. The market price of the license is equal to:
A)
the demand price of the good.
B)
the wedge that represents the difference between the demand price and the supply
price.
C)
the quota rent.
D)
the quota rent plus the wedge that represents the difference between the demand
price and the supply price.
Page 35
130.
If New York City had no medallion system for taxicabs, assuming that the supply curve
of taxicab rides is upward-sloping and the demand curve for taxicab rides is
downward-sloping, the price of a taxicab ride would:
A)
increase because of the higher safety hazards.
B)
not change from its current level.
C)
decrease.
D)
increase, but only slightly.
131.
Suppose the U.S. government imposes a binding quota on the number of Japanese-made
cars allowed into the United States. Assuming that Japanese-made cars and U.S.-made
cars are substitutes in consumption, we would expect the price of Japanese cars to
_____ and the price of U.S.-made cars to _____.
A)
increase; increase
B)
increase; decrease
C)
decrease; increase
D)
decrease; decrease
132.
The quota rent is:
A)
the difference between the demand price and the supply price at the quota limit.
B)
the rent received by landlords who own rent-controlled apartments.
C)
the opportunity cost of using a quota-controlled service or of buying a good that is
subject to an import quota.
D)
the minimum rent that the owner of a building must receive before he or she is
willing to rent out the building.
Use the following to answer question 133:
Figure: The Market for Clams
Page 36
133.
(Figure: The Market for Clams) Look at the figure The Market for Clams. The
government imposes a quota limiting sales of clams to 1,000 pounds. According to the
figure, the quota rent per pound in this case is:
A)
$7.50.
B)
$5.00.
C)
$2.50.
D)
The quota rent cannot be determined from the information provided.
Use the following to answer questions 134-135:
134.
(Table: Market for Fried Twinkies) Look at the table Market for Fried Twinkies.
Suppose the government decides to reduce fried Twinkie consumption as part of a war
on obesity. After careful study, the government decides to impose a quota of 5,000 on
production of fried Twinkies this year. What price will producers charge if they obey
the quota law?
A)
$1.20
B)
$1.30
C)
$1.50
D)
The answer cannot be determined with this information.
135.
(Table: Market for Fried Twinkies) Look at the table Market for Fried Twinkies. If the
government imposes a quota of 5,000 on the fried Twinkie market, the quota rent per
fried Twinkie will be:
A)
$1.20.
B)
$0.30.
C)
$1.50.
D)
$1.00.
Page 37
Use the following to answer questions 136-138:
Table: The Market for Taxi Rides
136.
(Table: The Market for Taxi Rides) Look at the table The Market for Taxi Rides. If a
government quota limit at 6 million rides is imposed, the quota rent accruing to the
owner of a taxi medallion will be _____ per ride, but there will be a total missed
opportunity (inefficiency) to consumers and producers of _____ million rides.
A)
$1; 1
B)
$2; 2
C)
$3; 3
D)
$4; 4
137.
(Table: The Market for Taxi Rides) Look at the table The Market for Taxi Rides. If a
government quota limit at 9 million rides is imposed, the quota rent that will accrue to
the owner of a taxi medallion will be _____ per ride, but there will be a total missed
opportunity (inefficiency) to consumers and producers of _____ million rides.
A)
$1; 1
B)
$2; 2
C)
$3; 3
D)
$4; 4
Page 38
138.
(Table: The Market for Taxi Rides) Look at the 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 medallion will be _____ per ride, but there will be a
total missed opportunity (inefficiency) to consumers and producers of _____ million
rides.
A)
$1; 1
B)
$2; 2
C)
$3; 3
D)
$4; 4
139.
If the government imposes a limit on sales of a good or service by licensing the right to
sell a given quantity of the good, the difference between the demand and supply price is:
A)
the quota rent.
B)
the market price of the license if the license is tradable.
C)
the quota price.
D)
the quota rent plus the market price of the license if the license is tradable.
140.
The difference between the demand price and the supply price at the quota limit is:
A)
the quota rent.
B)
the rent received by landlords who own rent-controlled apartments.
C)
the opportunity cost of using or buying a good, subject to an import quota.
D)
usually large enough to cause a surplus.
141.
Assuming that U.S. and French wines are substitutes in consumption, if the U.S.
government imposes a quota on the amount of French wine allowed into the United
States and the quota is set at a quantity below equilibrium, the price of French wine in
the United States will _____ while the price of the U.S.-produced wine will _____.
A)
increase; increase
B)
increase; decrease
C)
decrease; increase
D)
decrease; decrease
142.
An upper limit on the quantity of a good that can be bought and sold is a:
A)
quota limit.
B)
price ceiling.
C)
price floor.
D)
tariff.
Page 39
143.
Quota limits cause:
A)
the demand price to be above the supply price.
B)
the quantity demanded to be more than the quantity supplied.
C)
the quantity demanded to be less than the quantity supplied.
D)
the demand price to be less than the supply price.
144.
Suppose the United States removes the sugar quotas and the market price of sugar
drops. Since sugar is an input in candy, in the candy bar market, we would expect
consumer surplus to:
A)
increase.
B)
decrease.
C)
not change.
D)
Consumer surplus cannot be determined without information about the supply
curve.
145.
Which is NOT a correct statement about the undesirable side effects of a quantity
control?
A)
Quantity controls do not lead to deadweight loss.
B)
Some mutually beneficial transactions do not occur because of quantity controls.
C)
Quantity controls provide incentives for illegal activities.
D)
Quantity controls cause a wedge between the demand price and supply price.
146.
If a quota is set above the equilibrium quantity, there will be:
A)
incentives for illegal activities.
B)
missed opportunities in the form of mutually beneficial transactions that don’t
occur.
C)
a supply price for the quantity transacted that will exceed the demand price of the
quantity transacted.
D)
no effect.
147.
Quantity controls set below the equilibrium quantity cause all of the following
EXCEPT:
A)
incentives for illegal activities.
B)
missed opportunities in the form of mutually beneficial transactions that don’t
occur.
C)
the supply price of the quantity transacted exceeding the demand price of the
quantity transacted.
D)
quota rents.
Page 40
Use the following to answer question 148:
Figure: Quantity Controls
148.
(Figure: Quantity Controls) Look at the figure Quantity Controls. If the government
decides to restrict the quantity sold to 100, which of the following is FALSE?
A)
Total surplus will fall by areas C and E.
B)
The market is not at equilibrium.
C)
Consumer surplus is maximized.
D)
Mutually beneficial transactions have been missed.
Use the following to answer questions 149-150:
Figure: The Market for Sandwiches
Page 41
149.
(Figure: The Market for Sandwiches) Look again at the figure The Market for
Sandwiches. How much total surplus would be lost if there were a quota of eight
sandwiches that could be legally exchanged at a price of $5?
A)
$3
B)
$72
C)
$27
D)
$32
150.
(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches.
Suppose a price floor is set at $7. At this price, consumer surplus is equal to _____ and
producer surplus is equal to _____.
A)
$64; $40
B)
$64; $24
C)
$32; $24
D)
$32; $40
151.
A binding price ceiling will cause a persistent _____, and a binding price floor will
cause a persistent _____.
A)
surplus; surplus
B)
shortage; surplus
C)
shortage; shortage
D)
surplus; shortage
Use the following to answer questions 152-155:
Figure: The Shrimp Market
Page 42
152.
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
imposes a quota limiting sales of shrimp to 500 pounds, the quota rent per pound is:
A)
$15.
B)
$10.
C)
$5.
D)
The quota rent cannot be determined from the information provided.
153.
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is:
A)
$17.50.
B)
$10.
C)
$7.50.
D)
$0.
154.
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
imposes a quota limiting sales of shrimp to 1,000 pounds, the quota rent per pound is:
A)
$15.
B)
$10.
C)
$5.
D)
$0.
155.
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
imposes a quota limiting sales of shrimp to 250 pounds, it will have the same effect on
transactions as a price floor of:
A)
$17.50
B)
$10
C)
$7.50
D)
The answer cannot be determined from the information provided.
156.
Which of the following is a likely outcome of price controls and quota limits?
A)
prices higher than the market equilibrium price
B)
illegal activity as people invent ways to get around the market constraint
C)
shortages and units of output that must be disposed of
D)
shortages and inefficiency caused by buyers searching for units of the good
Page 43
157.
The market for salmon is in equilibrium. A price ceiling, a price floor, and a quota limit
in this market would all cause:
A)
deadweight loss arising from a quantity exchanged that is less than the equilibrium
quantity.
B)
a supply price that exceeds a demand price.
C)
revenue collected by the government on each unit of salmon harvested.
D)
deadweight loss arising from a transfer of surplus from consumers to producers.
158.
Price controls are always set below the market equilibrium price.
A)
True
B)
False
159.
Suppose Congress 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.
A)
True
B)
False
160.
A rent ceiling must be set above the equilibrium rent to be binding.
A)
True
B)
False
161.
A price ceiling benefits all consumers.
A)
True
B)
False
162.
Critics of the pharmaceutical industry often argue that price ceilings should be imposed
on drug manufacturers. If this happened, the quality of drugs would improve.
A)
True
B)
False
163.
Suppose the state of Mississippi sets a price floor in the market for cotton. If the floor is
set below the market-clearing price of cotton, the floor will cause a surplus of cotton.
A)
True
B)
False
Page 44
164.
To dispose of the unwanted surplus resulting from agricultural price floors, the
European Union pays exporters to sell products at a loss overseas.
A)
True
B)
False
165.
A binding minimum wage will generally cause increased unemployment for low-skilled
workers.
A)
True
B)
False
166.
If the state of Minnesota established a price floor in the market for pumpkins that was
double the current market-clearing price, this would lead to an inefficient number of
pumpkins sold in Minnesota.
A)
True
B)
False
167.
When transatlantic airfares were set artificially high by an international treaty, airlines
offered customers an inefficiently high quality of service.
A)
True
B)
False
168.
Licenses allowing taxis to operate issued by New York City in the 1930s are called
medallions.
A)
True
B)
False
169.
In New York City there are more than 100,000 licensed taxicabs.
A)
True
B)
False
170.
Although they cost more than $200,000 when they were issued in the 1930s, the New
York taxicab medallions are relatively inexpensive today, selling for around $3,000.
A)
True
B)
False
Page 45
171.
Quantity controls are usually in the form of price ceilings or price floors established by
the government.
A)
True
B)
False
172.
A limit on the amount of a foreign currency people are allowed to buy is an example of
a quota.
A)
True
B)
False
173.
A quota is the minimum amount of some good that can be bought and sold.
A)
True
B)
False
174.
Quotas, price ceilings, and price floors are all types of quantity controls that the
government may impose.
A)
True
B)
False
175.
The National Football League does not license quarterbacks. This means that the free
market determines the standards that an aspiring quarterback must achieve.
A)
True
B)
False
176.
The demand price of a given quantity of doughnuts is the price at which consumers will
demand that quantity. The supply price is the price at which doughnut producers will
supply that quantity.
A)
True
B)
False
177.
The American Medical Association licenses doctors. This licensing has probably led to
lower earnings for doctors over time.
A)
True
B)
False
Page 46
178.
If the demand curve for clams is downward-sloping, a quota that is set below the
equilibrium quantity will result in a demand price that is lower than the equilibrium
price.
A)
True
B)
False
179.
If the supply curve for clams is upward-sloping, a quota that is set below the equilibrium
quantity will result in a supply price that is lower than the equilibrium price.
A)
True
B)
False
180.
If the demand curve for clams is downward-sloping, a quota that is set below the
equilibrium quantity will decrease the price that consumers pay for clams.
A)
True
B)
False
181.
If the demand curve for clams is downward-sloping and the supply curve is
upward-sloping, a quota that is set above the equilibrium quantity will have no effect on
the market.
A)
True
B)
False
182.
If the demand curve for clams is downward-sloping and the supply curve is
upward-sloping, a quota that is set below the equilibrium quantity will result in a supply
price higher than the demand price.
A)
True
B)
False
183.
A quota rent for tuna is the difference between the demand price and the supply price if
a quota limit is imposed in the tuna market.
A)
True
B)
False
184.
The quota rent for a New York taxicab owner is equal to the market price of the license
that allows him to drive the cab.
A)
True
B)
False
Page 47
185.
Deadweight loss is the lost gains associated with transactions that do not occur because
of market intervention, such as a quota.
A)
True
B)
False
186.
Quotas are more effective than price controls because unlike price controls, quotas do
not cause deadweight loss.
A)
True
B)
False
187.
The quota rent is the same thing as deadweight loss.
A)
True
B)
False
188.
The quota rent is the result of a supply price that is above the demand price.
A)
True
B)
False
189.
A quota in the market for shrimp will cause inefficiency because mutually beneficial
transactions will not occur.
A)
True
B)
False
190.
How does an effective price ceiling affect the quantity demanded and the quantity
supplied in a competitive market?
191.
Suppose the market price of wheat is $7 a bushel and a price ceiling is set at $9 a bushel.
What is the impact of this price ceiling?
Page 48
Use the following to answer question 192:
Figure: Price Controls
192.
(Figure: Price Control) Look at the figure Price Controls. A price ceiling has been
imposed at point d. Identify the areas that correspond to the consumer surplus, producer
surplus, and deadweight loss with this price control. In addition, identify the area
representing lost producer surplus that has been transferred to consumers as a result of
this policy.
193.
How do price ceilings cause black markets?
194.
How does a price ceiling cause deadweight loss in the market?
195.
How could a minimum wage cause an incentive for illegal hiring practices?
Use the following to answer questions 196-197:
Page 49
196.
(Table: The Market for Hamburger Flippers) Look at the table The Market for
Hamburger Flippers. If the minimum wage in this market is $8, what is the effect on the
market? Who are the winners and losers?
197.
(Table: The Market for Hamburger Flippers) Look at the table The Market for
Hamburger Flippers. For hamburger flippers with a minimum wage of $8 per hour, can
you imagine a scenario in which the deadweight loss from the minimum wage is
lessened or even eliminated?
Use the following to answer question 198:
198.
(Table: The Market for Salmon) Look at the table The Market for Salmon. The state
government has imposed a quota of 6 million pounds and has licensed commercial
fishing boats to harvest the salmon. When the quota is reached, the season is over. What
is the quota rent per pound of salmon when 6 million pounds is harvested and sold?
199.
How is a quota limit different from or similar to a price control?
200.
A price floor or a price ceiling is an example of:
A)
a quantity control.
B)
a price control.
C)
market equilibrium price.
D)
a quota.
Page 50
201.
The minimum wage, which sets a lower limit on the wages that workers can earn, is
often above the equilibrium price. The minimum wage is an example of:
A)
a price floor.
B)
a price ceiling.
C)
a quota.
D)
an equilibrium price.
202.
The government might impose a price floor if _____ can make a strong moral or
political argument for _____ prices.
A)
demanders; lower
B)
suppliers; lower
C)
demanders; higher
D)
suppliers; higher
203.
The government might impose a price ceiling if _____ can make a strong moral or
political argument for _____ prices.
A)
demanders; lower
B)
suppliers; lower
C)
demanders; higher
D)
suppliers; higher
204.
A rent control scheme setting a maximum amount of rent paid below the equilibrium
rental price would most likely be supported by:
A)
people who wish to rent such an apartment.
B)
people who own rental apartments.
C)
both renters and owners.
D)
neither renters nor owners.
205.
In the rental housing market with price controls, the quantity of rental houses demanded
exceeds the quantity of rental housing supplied. This price control must be a:
A)
price ceiling.
B)
price floor.
C)
quota.
D)
quantity control.
206.
An effective price ceiling will most likely result in:
A)
an increase in producer surplus.
B)
an increase in consumer surplus.
C)
a decrease in consumer surplus.
D)
no change in either producer or consumer surplus.
Page 51
207.
A price ceiling results in:
A)
inefficiency resulting from overproduction of the good.
B)
inefficiency because transactions are held below the equilibrium quantity.
C)
a decrease in wasted resources, as consumers find such goods more easily.
D)
surpluses in the market, which eventually lead to inefficient production costs.
208.
A price ceiling on a good often results in:
A)
black market or underground transactions of the good.
B)
a surplus of the product.
C)
more communication between buyers and sellers about the appropriate price.
D)
a more efficient allocation of the good to buyers.
Use the following to answer question 209:
209.
(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied
and Quantity Demanded. The government institutes a price floor, and as a result too
many resources are allocated for the production of a good. The price floor in this market
must be equal to:
A)
$5.
B)
$10.
C)
$15.
D)
$20.
210.
An increase in producer surplus would most likely occur if:
A)
an effective price floor was imposed.
B)
an effective price ceiling was imposed.
C)
the market price of the good decreased.
D)
no changes occurred in the market.
Page 52
211.
An effective price floor would result in:
A)
a surplus of the good.
B)
a shortage of the good.
C)
a quantity control.
D)
an equilibrium price.
212.
If minimum wages are set above the equilibrium wage in the market, then the number of
workers hired will be _____ the number of people who are willing to work.
A)
less than
B)
greater than
C)
equal to
D)
less than, greater than, or equal to
213.
An effective minimum wage ultimately means that:
A)
some unskilled workers have a difficult time finding a job.
B)
employers must encourage workers to apply for positions.
C)
employers will have difficulty finding enough workers for their positions.
D)
employees are generally guaranteed employment.
214.
An effective price floor will lead to:
A)
quantity demanded being greater than quantity supplied.
B)
an excess supply or a surplus.
C)
the need for government to produce more of the good.
D)
suppliers determining the amount of the good bought and sold in the market.
215.
If government decides to control the amount of a good allowed into a market, this will:
A)
always result in an increase in efficiency in the market.
B)
increase incentives for market participants to engage in black market activities.
C)
result in the equilibrium quantity being produced if the quota is binding.
D)
lead to more of the good being produced.
216.
A quota is:
A)
a quantity restriction.
B)
a price control.
C)
a consumer surplus.
D)
a means to combat black markets.
Page 53
217.
Quotas often:
A)
result in few incentives to engage in illegal activities.
B)
lead to deadweight losses resulting from a wedge between the price of sellers and
that of demanders.
C)
lead to efficient market outcomes.
D)
are necessary to increase the quantity of the goods in the market.
218.
Which of the following statements is (are) TRUE?
I. Quantity controls 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.
A)
I
B)
II
C)
II and III
D)
I, II, and III
219.
Government intervention in the form of binding price floors or binding price ceilings
will:
A)
always enhance the efficiency of the market.
B)
result in either surpluses or shortages.
C)
move the market toward its equilibrium quantity more quickly.
D)
often be seen as necessary to decrease the activity of black markets.
220.
Inefficient allocations of goods to consumers often result from:
A)
price ceilings.
B)
producer surplus.
C)
equilibrium prices.
D)
consumer surplus.
Use the following to answer questions 221-223:
Page 54
221.
(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied
and Quantity Demanded. A government-imposed price ceiling equal to $5 would result
in:
A)
the equilibrium quantity being bought and sold in this market.
B)
excess demand.
C)
excess supply.
D)
a surplus occurring in this market.
222.
(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied
and Quantity Demanded. If a price ceiling of $10 is imposed in this market:
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.
223.
(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied
and Quantity Demanded. A price floor equal to _____ would produce excess supply in
this market.
A)
$5
B)
$10
C)
$15
D)
$20
Use the following to answer questions 224-227:
Figure: Market I
Page 55
224.
(Figure: Market I) Look at the figure Market I. A surplus of the good will result if the
price is:
A)
$15.
B)
$9.
C)
$6.
D)
$0.
225.
(Figure: Market I) Look at the figure Market I. If a price floor of $15 is imposed on this
market and the government chooses to purchase the surplus, the government must buy
_____ units of the good and spend a total amount of _____ on its purchase.
A)
5; $75
B)
10; $150
C)
9; $135
D)
9; $81
226.
(Figure: Market I) Look at the figure Market I. A price floor of $5 imposed on this
market would:
A)
result in a surplus of the good.
B)
have no effect.
C)
increase production of this good.
D)
increase consumer spending on this good.
227.
(Figure: Market I) Look at the figure Market I. A price floor at $15 would result in
deadweight loss of:
A)
$9.
B)
$10.
C)
$20.
D)
$40.50.
Page 57
Page 58
Page 59
Page 60
Page 61