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Supply, Demand, and Government Policies 1635
14.
A price ceiling is a legal minimum on the price at which a good or service can be sold.
a.
True
b.
False
15.
A price ceiling set above the equilibrium price is not binding.
a.
True
b.
False
16.
If a price ceiling is not binding, then it will have no effect on the market.
a.
True
b.
False
17.
To be binding, a price ceiling must be set above the equilibrium price.
a.
True
b.
False
18.
A price ceiling set below the equilibrium price is binding.
a.
True
b.
False
19.
A price ceiling set below the equilibrium price is nonbinding.
a.
True
b.
False
20.
A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity
supplied.
a.
True
b.
False
21.
A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity
supplied.
a.
True
b.
False
22.
A binding price ceiling causes quantity demanded to be less than quantity supplied.
a.
True
b.
False
23.
A price ceiling set below the equilibrium price causes a shortage in the market.
a.
True
b.
False
24.
A price ceiling set above the equilibrium price causes a surplus in the market.
a.
True
b.
False
25.
A binding price ceiling causes a shortage in the market.
a.
True
b.
False
26.
When a binding price ceiling is imposed on a market for a good, some people who want to buy the
good cannot do
so.
a.
True
b.
False
27.
Long lines and discrimination are examples of rationing methods that may naturally develop in
response to a binding
price ceiling.
a.
True
b.
False
28.
Price ceilings are typically imposed to benefit buyers.
a.
True
b.
False
29.
Price ceilings are typically imposed to benefit sellers.
a.
True
b.
False
30.
Binding price ceilings benefit consumers because they allow consumers to buy all the goods they
demand at a lower
price.
a.
True
b.
False
31.
All buyers benefit from a binding price ceiling.
a.
True
b.
False
32.
A binding price ceiling may not help all consumers, but it does not hurt any consumers.
a.
True
b.
False
33.
When the government imposes a binding price ceiling on a competitive market, a surplus of the
good arises, and
sellers must ration the scarce goods among the large number of potential buyers.
a.
True
b.
False
34.
The rationing mechanisms that develop under binding price ceilings are usually inefficient.
a.
True
b.
False
35.
If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50,
then the price
ceiling is a binding constraint on the market.
a.
True
b.
False
36.
If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2,
then the price
ceiling is a binding constraint on the market.
a.
True
b.
False
37.
A price ceiling caused the gasoline shortage of 1973 in the United States.
a.
True
b.
False
38.
One common example of a price ceiling is rent control.
a.
True
b.
False
39.
The goal of rent control is to help the poor by making housing more affordable.
a.
True
b.
False
40.
Economists argue that rent control is a highly efficient way to help the poor raise their standard of
living.
a.
True
b.
False
41.
The primary effect of rent control in the short run is to reduce rents.
a.
True
b.
False
42.
The effects of rent control in the long run include lower rents and lower-quality housing.
a.
True
b.
False
43.
Rent control may lead to lower rents for those who find housing, but the quality of the housing
may also be lower.
a.
True
b.
False
44.
Renters of rent-controlled apartments will likely benefit from both lower rents and higher quality
of apartments.
a.
True
b.
False
45.
In a free market, the price of housing adjusts to eliminate the shortages that give rise to
undesirable landlord
behavior.
a.
True
b.
False
46.
Because the supply and demand of housing are inelastic in the short run, the initial shortage
caused by rent control
is large.
a.
True
b.
False
47.
The housing shortages caused by rent control are larger in the long run than in the short run
because both the
supply of housing and the demand for housing are more elastic in the long run.
a.
True
b.
False
48.
A price floor is a legal minimum on the price at which a good or service can be sold.
a.
True
b.
False
49.
A price floor set above the equilibrium price is not binding.
a.
True
b.
False
50.
A price floor set above the equilibrium price is binding.
a.
True
b.
False
51.
If a price floor is not binding, then it will have no effect on the market.
a.
True
b.
False
52.
To be binding, a price floor must be set above the equilibrium price.
a.
True
b.
False
53.
A price floor set below the equilibrium price causes quantity supplied to exceed quantity
demanded.
a.
True
b.
False
54.
A price floor set above the equilibrium price causes quantity supplied to exceed quantity
demanded.
a.
True
b.
False
55.
A binding price floor causes quantity supplied to be less than quantity demanded.
a.
True
b.
False
56.
A price floor set below the equilibrium price causes a surplus in the market.
a.
True
b.
False
57.
A price floor set above the equilibrium price causes a surplus in the market.
a.
True
b.
False
58.
A binding price floor causes a shortage in the market.
a.
True
b.
False
59.
When a binding price floor is imposed on a market for a good, some people who want to sell the
good cannot do so.
a.
True
b.
False
60.
Discrimination is an example of a rationing mechanism that may naturally develop in response to a
binding price
floor.
a.
True
b.
False
61.
Price floors are typically imposed to benefit buyers.
a.
True
b.
False
62.
Price floors are typically imposed to benefit sellers.
a.
True
b.
False
63.
Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a
higher price.
a.
True
b.
False
64.
Not all sellers benefit from a binding price floor.
a.
True
b.
False
65.
A binding price floor may not help all sellers, but it does not hurt any sellers.
a.
True
b.
False
66.
The rationing mechanisms that develop under binding price floors are usually efficient.
a.
True
b.
False
67.
If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of
$500 on airline
tickets, then fewer airline tickets will be sold than at the market equilibrium.
a.
True
b.
False
68.
If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of
$400 on airline
tickets, then fewer airline tickets will be sold than at the market equilibrium.
a.
True
b.
False
Supply, Demand, and Government Policies 1653
Figure 6-35
69.
Refer to Figure 6-35. A price ceiling set at $30 would create a shortage of 20 units.
a.
True
b.
False
70.
Refer to Figure 6-35. A price ceiling set at $70 would create a shortage of 40 units.
a.
True
b.
False
71.
Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.
a.
True
b.
False
72.
Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.
a.
True
b.
False
73.
Workers determine the supply of labor, and firms determine the demand for labor.
a.
True
b.
False
