51) The above figure shows the market for DVDs. The government decides that all citizens
deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After
this price ceiling is in effect and taking account of the resources lost in search, consumer surplus
equals ________.
A) $900,000
B) $400,000
C) $200,000
D) $180,000
E) $100,000
52) The above figure shows the market for DVDs. The government decides that all citizens
deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After
this price ceiling is in effect, producer surplus equals ________.
A) $900,000
B) $400,000
C) $200,000
D) $100,000
E) $1,800,000
53) The above figure shows the market for DVDs. The government decides that all citizens
deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs. After
this price ceiling is in effect, deadweight loss equals ________.
A) $1,600,000
B) $200,000
C) $800,000
D) $1,800,000
E) $400,000
54) In a housing market with a rent ceiling set below the equilibrium rent, as time passes the
supply of apartments
A) decreases.
B) increases.
C) does not change.
D) becomes fixed by the government.
E) increases while the demand for apartments decreases.
55) New York City, which has had a rent ceiling law for more than fifty years, has many
abandoned apartment buildings throughout the city. Which of the following explains this?
A) Few workers with jobs in the city want to live in there because of pollution.
B) No building permits for new apartment buildings have been issued for over fifty years.
C) Once any building gets so old, it is abandoned.
D) Landlords have no incentive to finance maintenance and remodeling of apartment buildings.
E) Rent ceilings make the construction of new buildings so profitable that old buildings are
simply abandoned.
56) Which of the following is an example of the unfairness of rent control?
A) Voluntary exchange is encouraged by rent control.
B) Racial discrimination in renting is discouraged by rent control.
C) Newcomers have a more difficult time finding apartments.
D) Rich people do not get apartments in these markets.
E) Too many people rent apartments.
57) Suppose the city of Chicago imposes a rent control program that fixes rents at $400 below
the equilibrium rent. With this plan
A) the quantity of apartments demanded will increase.
B) the quantity of apartments supplied will increase.
C) young people and poor people will have an easier time finding apartments.
D) the deadweight loss in Chicago’s apartment market will be eliminated.
E) there will be a surplus of apartments offered for rent.
58) Rent controls
A) create a deadweight loss.
B) increase maintenance by landlords.
C) benefit people who live in rent controlled apartments.
D) Both answers A and C are correct.
E) Both answers B and C are correct.
59) Rent ceilings are difficult to abolish because
A) they create such large profits for landlords.
B) current renters offer political support for ceilings.
C) the government doesn’t like to give up the tax revenues associated with ceilings.
D) they result in an efficient use of resources.
E) landlords lobby to keep them in place.
60) A price ceiling is a government regulation that makes it illegal to charge a price
A) below the equilibrium price.
B) above the equilibrium price.
C) for a good or service.
D) above some specified level.
E) below some specified level.
61) When a price ceiling is set below the equilibrium price, the quantity supplied ________ the
quantity demanded and ________ exists.
A) is less than; a surplus
B) is less than; a shortage
C) is greater than; a surplus
D) is greater than; a shortage
E) equals; an equilibrium
62) The graph shows the market for holiday condos in West Palm Beach. The equilibrium rent is
________ a week.
A) any amount less than $1,550
B) any amount greater than $1,550
C) $1,550
D) $4,000
E) None of the above answers is correct.
63) In a housing market with a rent ceiling set below the equilibrium rent,
A) some people seeking an apartment to rent will not be able to find one.
B) the total cost of renting an apartment will decrease for all those seeking housing.
C) some landlords will not be able to find renters to fill available apartments.
D) search will decrease because renters no longer need to search for less expensive apartments.
E) None of the above answers are correct because to have an impact the rent ceiling must be set
above the equilibrium rent.
64) The graph shows the market for ski chalets in Aspen. The Aspen Tourist Board asks the local
government to impose a rent ceiling on ski chalets. If the rent ceiling is set at $1,900 a week,
then there is ________.
A) a shortage of 3,000 chalets a week
B) a surplus of 3,000 chalets a week
C) neither a shortage or surplus of chalets
D) a shortage of 6,000 chalets a week
E) a surplus of 6,000 chalets a week.
65) A rent ceiling on housing creates a problem of allocating the available housing units because
A) the demand for housing decreases and the demand curve shifts leftward.
B) the supply of housing increases and the supply curve shifts rightward.
C) a shortage of apartments occurs.
D) a surplus of apartments occurs.
E) it eliminates search, which is one of the major ways housing units are allocated.
66) Suppose that the government imposes a price ceiling on gasoline that is below the
equilibrium price. The black market for gasoline is ________ market in which the price
________ ceiling price.
A) a legal; exceeds the
B) an illegal; exceeds the
C) a legal; is less than the
D) an illegal; is less than the
E) an illegal; equals
67) If a rent ceiling is imposed that is less than the equilibrium rent, which of the following
outcomes is most likely to occur?
A) reduced search activity
B) black market activity
C) a building boom
D) a housing surplus
E) None of the above answers is correct because to have an impact the rent ceiling must be above
the equilibrium rent.
68) The graph shows the market for ski chalets in Aspen. If a rent ceiling is set at $1,900 a week,
then the maximum amount charged in the black market is ________ a week.
A) $1,900
B) $2,050
C) $2,125
D) $225
E) $150
69) The graph shows the market for holiday condos in West Palm Beach. If a rent ceiling is set at
$1,700 a week, the quantity of holiday condos rented ________.
A) is 2,000 a week
B) is 4,000 a week
C) is 5,000 a week
D) is some amount but more information is needed to determine the amount.
E) depends on the black market
70) Rent ceilings
A) increase search activity.
B) result in surpluses.
C) create efficiency.
D) benefit producers.
E) have no effect if they are set below the equilibrium rent.
71) A rent ceiling creates a deadweight loss
A) if it is set below the equilibrium rent.
B) if it is set equal to the equilibrium rent.
C) if it set above the equilibrium rent.
D) if it decreases the taxes the government collects in the housing market.
E) never, because if it did create a deadweight loss, the government would not impose it.
72) If a price ceiling is introduced in the market for milk below the market equilibrium price,
then the producer surplus made by dairy farmers ________.
A) will increase
B) will decrease
C) will not change
D) might increase or decrease depending on whether the demand for milk increases or decreases
E) might increase or decrease depending on whether the supply of milk decreases or increases
73) The graph shows the market for rental housing in Little Rock. The market for apartments is
efficient when ________.
A) the quantity of apartments demanded is 12,000 a month
B) the rent ceiling is set at $300 a month
C) there is no rent ceiling
D) the quantity of apartments supplied is 6,000 a month
E) the rent charged is less than $450
74) Rent ceilings
A) eliminate the problem of scarcity.
B) allocate resources efficiently.
C) ensure that housing goes to the poorer people.
D) benefit renters living in rent-controlled apartments.
E) benefit all landlords because the landlords know what rent to charge their renters.
75) A rent ceiling is
A) fair, because it helps all renters.
B) fair, because it insures that low-income families can rent apartments.
C) fair, because it helps all landlords.
D) unfair.
E) fair, because it helps more renters than it harms.
1) A price floor is
A) the highest possible legal price that can be charged for a good or service.
B) usually equal to the equilibrium price established before the government imposed the price
floor.
C) the lowest legal price at which a good or service can be traded.
D) a legal price of zero that can be charged for a good or service.
E) almost always equal to the price ceiling.
2) A price floor makes prices
A) below the price floor illegal.
B) above the price floor illegal.
C) below the equilibrium price illegal.
D) above the equilibrium price illegal.
E) None of the above answers is correct.
3) Which of the following is an example of a price floor?
A) a law passed in a city to lower apartment rents by setting the maximum price that can be
charged for rent
B) an equilibrium price
C) a minimum wage law
D) a law setting the highest price that can legally be charged for a gallon of gasoline.
E) None of the above answers give examples of a price floor.
4) A price floor set above the equilibrium price
A) creates a surplus.
B) creates a shortage.
C) creates excess demand.
D) balances supply and demand.
E) has no effect.
5) A price floor
A) changes the equilibrium price if it is imposed in black markets.
B) changes the price and quantity if it is set below the equilibrium price.
C) changes the price and quantity if it is set above the equilibrium price.
D) does not create a black market if it is set above the equilibrium price.
E) changes the price and quantity only if it equals the equilibrium price.
6) Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price
floor of $5 per gallon of milk, the
A) quantity supplied of milk falls short of the quantity demanded.
B) quantity supplied of milk exceeds the quantity demanded.
C) supply increases.
D) demand decreases.
E) price of milk remains $4 per gallon.
7) In the labor market, as wages rise, households
A) decrease the quantity of labor supplied.
B) increase the quantity of labor supplied.
C) decrease the quantity of labor demanded.
D) increase the quantity of labor demanded.
E) increase the supply of labor.
8) A stated goal of a minimum wage is to
A) increase government tax revenue.
B) stabilize production costs.
C) boost the incomes of low-wage earners.
D) decrease business profits.
E) increase business profits by making the labor market more efficient.
9) A minimum wage law in a competitive labor market
A) creates a shortage of labor.
B) causes equality between the quantity of labor supplied and the quantity demanded.
C) creates a surplus of labor.
D) lowers the wage rate paid to workers.
E) has an impact only if it is set below the equilibrium wage rate.
10) Why do some workers lose their job when a minimum wage level is increased?
A) The increase in labor costs decreases the supply of the product, thereby raising the price of
the good so that the equilibrium quantity decreases to zero.
B) The increase in the wage rate decreases the quantity of labor demanded.
C) The demand for labor is perfectly inelastic.
D) The supply of labor decreases.
E) The demand for labor is perfectly elastic.
11) A minimum wage increases unemployment by
A) increasing the quantity of labor demanded.
B) decreasing the quantity of labor demanded.
C) shifting only the labor supply curve rightward.
D) shifting only the labor demand curve leftward.
E) shifting the labor supply curve rightward and shifting the labor demand curve leftward.
12) Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in
the minimum wage to $7.50 per hour leads to
A) a surplus of housekeepers.
B) a shortage of housekeepers.
C) no change in the market for housekeepers.
D) an increase in the quantity of housekeepers supplied.
E) unemployment of housekeepers.
13) Suppose the equilibrium wage rate for apricot pickers is $7.00 per hour and at that wage rate
the equilibrium quantity of apricot pickers employed is 14,000. If the minimum wage is set at
$7.50 per hour, then the
A) quantity of apricot pickers employed increases.
B) quantity of apricot pickers employed decreases.
C) quantity of apricot pickers employed does not change.
D) wage rate for apricot pickers decreases.
E) quantity of apricot pickers demanded does not change and the quantity of apricot pickers
supplied does not change.
14) Suppose the current equilibrium wage rate for landscapers is $6.65 in Little Rock; $7.50 in
St. Louis and $9.05 in Raleigh. An increase in the minimum wage to $7.50 per hour results in
unemployment of landscapers in
A) Little Rock and St. Louis.
B) only Raleigh.
C) Little Rock, St. Louis, and Raleigh.
D) only Little Rock.
E) St. Louis and Raleigh.
15) Suppose the equilibrium wage rate for apricot pickers is $9.00 per hour in California and at
that wage rate the equilibrium quantity of apricot pickers is 14,000. If the minimum wage is set
at $7.50 per hour, then the
A) quantity of apricot pickers employed increases.
B) quantity of apricot pickers employed decreases.
C) quantity of apricot pickers employed does not change.
D) wage rate for apricot pickers increases.
E) some apricot pickers are unemployed.
16) The labor demand and labor supply schedules are given in the table above. If a minimum
wage of $11 per hour is imposed,
A) a surplus of 300 workers occurs.
B) there is no shortage or surplus of workers.
C) 900 workers are employed.
D) Both answers B and C are correct.
E) Both answers A and C are correct.
17) The labor demand and labor supply schedules are given in the table above. If a minimum
wage of $9 per hour is imposed,
A) a surplus of 300 workers occurs.
B) a shortage of 300 workers occurs.
C) there is no surplus or shortage of workers.
D) the quantity demanded is 1,000 workers.
E) there is unemployment of 700 workers.
18) The figure above shows the labor market in a region. For a minimum wage to change the
wage rate and amount of employment, it must be
A) left to the forces of supply and demand.
B) set above $6 an hour.
C) set equal to $6 an hour.
D) set below $6 an hour.
E) set at $12 per hour.
19) The figure above shows the labor market in a region. If a minimum wage of $8 an hour is
imposed, then there are ________ unemployed workers.
A) 20,000
B) 40,000
C) 60,000
D) 80,000
E) zero
20) The figure above shows the labor market in a region. If a minimum wage of $8 an hour is
imposed, then the quantity of labor supplied is ________ and the quantity of labor demanded is
________.
A) 60,000; 60,000
B) 80,000; 40,000
C) 40,000; 60,000
D) 60,000; 40,000
E) 40,000; 40,000
21) The figure above shows the labor market in a region. In which of the following cases would
the amount of unemployment be the largest?
A) when the market is at its equilibrium, with no minimum wage
B) when a minimum wage of $4 an hour is imposed
C) when a minimum wage of $6 an hour is imposed
D) when a minimum wage of $8 an hour is imposed
E) None of the above because the market will adjust so that there is no unemployment.
22) One result of the minimum wage is
A) a black market for labor that pays more than the minimum wage.
B) a black market for labor that pays less than the minimum wage.
C) decreased job search activity.
D) a decrease in unemployment among poor and unskilled workers.
E) an increase in employment among poor and unskilled workers.
23) One result of a minimum wage is
A) illegal hiring of people at wages below the minimum wage.
B) more people with jobs.
C) a change in the equilibrium wage.
D) lower costs paid by firms.
E) fewer people searching for work because they realize that firms have decreased the number of
people hired.
24) A minimum wage law
A) lowers the wage rate of workers who are able to get a job.
B) increases employment.
C) increases the time spent searching by workers who cannot find a job.
D) creates efficiency in the labor market.
E) must be set below the equilibrium wage rate in order to have an impact.