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:
2.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: Rent Controls. Without rent controls,
the equilibrium quantity is:
A)
Q4.
B)
Q1.
C)
Q2.
D)
Q3.
3.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: Rent Controls. Without rent controls,
the equilibrium rent is:
A)
Rent4.
B)
Rent1.
C)
Rent2.
D)
Rent3.
6.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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.
(Ref 10-1 Figure: Rent Controls) Use Figure 10-1: 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 usually 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 is most likely to
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.
Suppose the NFL wants to give the “common fan” the opportunity to attend the Super
Bowl, so it sets Super Bowl prices “low” – let’s say they set ticket prices for a regular
seat at Super Bowl LI to cost just $400. People who have tickets, however, can turn
around and sell them online for $1,500 or more. If there are no transaction costs for fans
with tickets to sell them, the true cost to a fan of attending Super Bowl LI 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 immediate 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.
(Ref 10-2 Table: The Market for Soda) Use Table 10-2: 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.
(Ref 10-2 Table: The Market for Soda) Use Table 10-2: 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 _____ cans.
A)
10
B)
8
C)
6
D)
4
21.
(Ref 10-2 Table: The Market for Soda) Use Table 10-2: 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 2 cans.
B)
a shortage of 3 cans.
C)
a surplus of 3 cans.
D)
equilibrium in the market for soda.
Page 6
22.
(Ref 10-2 Table: The Market for Soda) Use Table 10-2: The Market for Soda. If the
government imposes a price ceiling of $1 per can of soda, the quantity of soda supplied
will be _____ cans.
A)
7
B)
8
C)
9
D)
10
23.
(Ref 10-2 Table: The Market for Soda) Use Table 10-2: The Market for Soda. If the
government imposes a price ceiling of $1 per can of soda, the quantity of soda
demanded will be _____ cans.
A)
10
B)
8
C)
6
D)
4
Use the following to answer question 24:
24.
(Ref 10-3 Table: Market for Fried Twinkies) Use Table 10-3: 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:
25.
(Ref 10-4 Table: Market for Apartments) Use Table 10-4: 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.
(Ref 10-4 Table: Market for Apartments) Use Table 10-4: 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.
(Ref 10-4 Table: Market for Apartments) Use Table 10-4: 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 per pound. 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 price _____ is because it feels
the price is too high for _____.
A)
ceiling; consumers
B)
floor; consumers
C)
ceiling; producers
D)
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 _____ the equilibrium price.
A)
lower than
B)
higher than
C)
the same as
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)
b; surplus; f and e
B)
b; shortage; f and e
C)
d; shortage; i and h
D)
d; surplus; e and h
36.
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.
37.
A student organization forms on your college campus to protest the high rent for
apartments near campus. This organization is planning a meeting with the dean and the
president of the college. Which choice best describes one policy the student
organization might fight for?
A)
a laissez faire policy
B)
a price floor
C)
a price ceiling
D)
a quantity control
Page 10
38.
Hugo Chavez was the president of Venezuela. Venezuela is a major producer of oil
products, which remain a critical component of Venezuela’s economy. Suppose
President Chavez 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. This policy is called a:
A)
laissez faire policy.
B)
price floor.
C)
price ceiling.
D)
quota.
39.
Hugo Chavez was the president of Venezuela. Venezuela is a major producer of oil
products, which remain a critical component of Venezuela’s economy. Suppose
President Chavez 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 a quantity of gasoline demanded that is
_____ the quantity of gasoline supplied.
A)
equal to
B)
greater than
C)
less than
D)
greater than or equal to
Use the following to answer question 40:
Page 11
40.
(Ref 10-6 Figure: The Market for Hybrid Cars) Use Figure 10-6: 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
Use the following to answer questions 41-42:
41.
(Ref 10-7 Figure: The Market for Economics Textbooks) Use Figure 10-7: 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
Page 12
42.
(Ref 10-7 Figure: The Market for Economics Textbooks) Use Figure 10-7: 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
43.
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.
44.
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.
45.
A persistent shortage may occur if:
A)
the government imposes a price ceiling below the equilibrium price.
B)
the government imposes a price floor below the equilibrium price.
C)
demand keeps falling.
D)
supply shifts rightward.
46.
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.
47.
Rent controls usually 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 low-income recipients will clearly be helped.
Page 13
48.
A price ceiling will not have an immediate 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.
Use the following to answer question 49:
49.
(Ref 10-8 Table: Market for Butter) Use Table 10-8: 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 _____ million pounds.
A)
10.5
B)
9.0
C)
1.5
D)
10.0
Page 14
Use the following to answer questions 50-52:
50.
(Ref 10-9 Figure: Supply and Demand) Use Figure 10-9: 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.
51.
(Ref 10-9 Figure: Supply and Demand) Use Figure 10-9: 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.
52.
(Ref 10-9 Figure: Supply and Demand) Use Figure 10-9: 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.
Page 15
53.
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.
54.
Producers will sometimes lower the quality of a good when the government imposes:
A)
any price control.
B)
an excise tax.
C)
a binding price floor.
D)
a binding price ceiling.
55.
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.
56.
Price ceilings will impose costs on society because they:
A)
will eliminate long waiting lines.
B)
may result in black markets, where prices 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.
57.
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.
Page 16
58.
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.
59.
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)
price controls offer subsidies for market transactions.
D)
individuals can profit by illegal exchanges.
60.
Which example would be considered 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
61.
In a(n) _____ market, goods or services are bought and sold illegally.
A)
black
B)
uncontrolled
C)
unregulated
D)
unproductive
62.
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.
63.
Rent controls in New York City do NOT cause:
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.
Page 17
64.
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.
65.
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)
necessarily improve equality between rich and poor since the poor can now afford
gasoline.
66.
A price ceiling below the equilibrium price is likely to result in a persistent _____, a
transfer of surplus from _____, and _____ deadweight loss.
A)
surplus; producers to some consumers; some
B)
shortage; producers to some consumers; some
C)
shortage; some consumers to producers; no
D)
surplus; some consumers to producers; some
67.
A binding rent-control price ceiling does NOT result in:
A)
inefficiently low transaction costs.
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.
68.
Which inefficiency is NOT caused by binding price ceilings?
A)
inefficient allocation to consumers
B)
wasted resources
C)
potential illegal activity
D)
inefficient allocation of sales among sellers
69.
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.
Page 18
70.
Governments continue to impose price controls. Which statement 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 71:
71.
(Ref 10-10 Table: The Market for Soda) Use Table 10-10: 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.
72.
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.
Page 19
73.
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 74:
74.
(Ref 10-11 Table: Market for Butter) Use Figure 10-11: 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
75.
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 immediate effect on the price of corn.
D)
increase the supply of corn.
Page 20
Use the following to answer question 76:
76.
(Ref 10-12 Figure: Supply and Demand) Use Figure 10-12: Supply and Demand. A
binding price floor is represented by:
A)
P1.
B)
P2.
C)
P3.
D)
point C.
77.
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 78-80:
78.
(Ref 10-13 Figure: The Market for Butter) Use Figure 10-13: The Market for Butter. If a
government price floor of $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
79.
(Ref 10-13 Figure: The Market for Butter) Use Figure 10-13: The Market for Butter. If a
government price floor of $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
80.
(Ref 10-13 Figure: The Market for Butter) Use Figure 10-13: The Market for Butter. If a
government price floor of $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
81.
Which statement is a reason for governments imposing or maintaining price controls?
A)
Some consumers and producers can benefit from price controls.
B)
Price controls prevent the deadweight loss that occurs when the market is in
equilibrium.
C)
The government earns revenue from price controls.
D)
Price controls improve the efficiency of the market.
82.
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
83.
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.
84.
When the minimum wage increases, which outcome is most likely?
A)
Unemployment among skilled workers decreases.
B)
Fewer workers are willing to work off the books.
C)
Skilled workers will outnumber unskilled workers.
D)
Unemployment among unskilled workers increases.
85.
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.
86.
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.
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87.
A minimum price set above the equilibrium price is a:
A)
demand price.
B)
supply price.
C)
binding price floor.
D)
binding price ceiling.
88.
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 immediate effect on the price of the good.
D)
increase the quantity supplied of the good.
Use the following to answer question 89:
89.
(Ref 10-14 Figure: The Shrimp Market) Use Figure 10-14: The Shrimp Market. If the
government wants to limit shrimp sales to 500 pounds, it can impose a price:
A)
floor of $20.
B)
floor of $10.
C)
ceiling of $5.
D)
floor of $15.
Page 24
90.
Which example would be considered 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
91.
The likely result of a binding 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
92.
If the minimum wage is a binding price floor:
A)
those who want to work will outnumber the jobs available.
B)
the market-clearing equilibrium wage will increase.
C)
there will be a job for everyone who is willing to work.
D)
business owners will hire more workers.
Use the following to answer question 93:
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93.
(Ref 10-15 Figure: The Market for English Textbooks) Use Figure 10-15: 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
Use the following to answer question 94:
94.
(Ref 10-16 Figure: The Market for Milk) Use Figure 10-16: 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
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Use the following to answer question 95:
95.
(Ref 10-17 Figure: The Market for Tortillas) Use Figure 10-17: 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
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Use the following to answer question 96:
96.
(Ref 10-18 Figure: The Market for Spanish Textbooks) Use Figure 10-18: 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 price _____, and for it to be binding, one
possible price would be _____.
A)
floor; $90
B)
floor; $40
C)
ceiling; $40
D)
ceiling; $90
97.
A binding price floor is a _____ price set _____ the equilibrium price.
A)
minimum; at
B)
maximum; below
C)
minimum; above
D)
maximum; above
98.
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.
Page 28
99.
A minimum price that the government guarantees farmers will receive for a particular
crop is a(n):
A)
price ceiling.
B)
price floor (or price support).
C)
deficiency price.
D)
export subsidy.
Use the following to answer questions 100-101:
100.
(Ref 10-19 Figure: Supply and Demand in Agriculture) Use Figure 10-19: Supply and
Demand in Agriculture. The government could help increase some 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
Page 29
101.
(Ref 10-19 Figure: Supply and Demand in Agriculture) Use Figure 10-19: 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.
102.
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 103-105:
103.
(Ref 10-20 Figure: Price Controls) Use Figure 10-20: 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
Page 30
104.
(Ref 10-20 Figure: Price Controls) Use Figure 10-20: 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.
105.
(Ref 10-20 Figure: Price Controls) Use Figure 10-20: 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.
106.
The persistent unwanted surplus that results from a binding price floor causes
inefficiencies that do not include:
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.
107.
A binding price floor causes:
A)
a shortage in the market.
B)
a surplus in the market.
C)
an efficient use of resources.
D)
equilibrium.
108.
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.
B)
excess demand will develop.
C)
the quality of the good supplied will likely decrease.
D)
quantity supplied will increase.
109.
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.
Page 31
110.
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.
111.
Producers may supply a good with inefficiently high quality if the government imposes
a:
A)
price ceiling set above the equilibrium price.
B)
price floor set below the equilibrium price.
C)
binding price floor.
D)
binding price ceiling.
112.
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.
113.
A binding 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 transacted is less than the equilibrium quantity transacted.
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.
114.
Which inefficiency is not caused by price floors?
A)
inefficiently low quality
B)
inefficient allocation of sales among sellers
C)
wasted resources
D)
illegal activity
Page 32
Use the following to answer questions 115-116:
115.
(Ref 10-21 Figure: The Market for Hybrid Cars) Use Figure 10-21: 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
116.
(Ref 10-21 Figure: The Market for Hybrid Cars) Use Figure 10-21: 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
117.
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
Page 33
118.
The market for salmon is in equilibrium. A binding price ceiling, a binding price floor,
and a quota limit below the market equilibrium 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.
119.
Price controls are always set below the market equilibrium price.
A)
True
B)
False
120.
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
121.
A rent ceiling must be set above the equilibrium rent to be binding.
A)
True
B)
False
122.
A price ceiling benefits all consumers.
A)
True
B)
False
123.
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
124.
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 34
125.
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
126.
Economic models predict that a binding minimum wage will generally cause increased
unemployment for low-skilled workers.
A)
True
B)
False
127.
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
128.
When transatlantic airfares were set artificially high by an international treaty, airlines
offered customers an inefficiently high quality of service.
A)
True
B)
False
129.
How does an effective price ceiling affect the quantity demanded and the quantity
supplied in a competitive market?
130.
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?
131.
How do binding price ceilings encourage black markets?
Page 35
Use the following to answer questions 132-133:
132.
(Ref 10-22 Figure: The Market for Sandwiches) Use Figure 10-22: 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
133.
(Ref 10-22 Figure: The Market for Sandwiches) Use Figure 10-22: 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
134.
How does a binding price ceiling cause deadweight loss in the market?
135.
How could a minimum wage cause an incentive for illegal hiring practices?
Page 36
Use the following to answer questions 136-137:
136.
(Ref 10-23 Table: The Market for Hamburger Flippers) Use Table 10-23: 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?
137.
(Ref 10-23 Table: The Market for Hamburger Flippers) Use Table Ref 10-23: 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?
138.
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.
139.
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(n):
A)
price floor.
B)
price ceiling.
C)
quota.
D)
equilibrium price.
140.
The government might impose a price floor if _____ in a market can make a strong
moral or political argument for _____ prices.
A)
consumers; lower
B)
producers; lower
C)
consumers; higher
D)
producers; higher
Page 37
141.
The government might impose a price ceiling if _____ in a market can make a strong
moral or political argument for _____ prices.
A)
consumers; lower
B)
producers; lower
C)
consumers; higher
D)
producers; higher
142.
A rent-control scheme that sets the maximum allowable rent at a price below the
equilibrium rental price would most likely be supported by:
A)
people who wish to rent an apartment.
B)
people who own rental apartments.
C)
both renters and owners.
D)
neither renters nor owners.
143.
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.
144.
An effective price ceiling will most likely result in:
A)
an increase in the price.
B)
a decrease in deadweight loss.
C)
a decrease in producer surplus.
D)
no change in either producer or consumer surplus.
145.
A binding 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.
146.
A price ceiling on a good often results in:
A)
$5.
B)
$10.
C)
$15.
D)
$20.
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147.
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.
148.
An effective price floor would result in a(n):
A)
surplus of the good.
B)
shortage of the good.
C)
quantity control.
D)
equilibrium price.
149.
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 at the
prevailing wage.
A)
less than
B)
greater than
C)
equal to
D)
less than, greater than, or equal to
150.
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)
workers are generally guaranteed employment.
151.
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.
152.
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.
Page 39
153.
Inefficient allocations of goods to consumers often result from:
A)
price ceilings.
B)
producer surpluses.
C)
increases in income.
D)
market transactions.
Use the following to answer questions 154-156:
154.
(Ref 10-25 Table: Quantity Supplied and Quantity Demanded) Use Table 10-25:
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.
155.
(Ref 10-25 Table: Quantity Supplied and Quantity Demanded) Use Table 10-25:
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.
156.
(Ref 10-25 Table: Quantity Supplied and Quantity Demanded) Use Table 10-25:
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
Page 40
157.
(Ref 10-26 Figure: Market I) Use Figure 10-26: Market I. A surplus of the good will
result if the price is:
A)
$15.
B)
$9.
C)
$6.
D)
$0.
Use the following to answer questions 158-160:
158.
(Ref 10-26 Figure: Market I) Use Figure 10-26: 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
159.
(Ref 10-26 Figure: Market I) Use Figure 10-26: Market I. A price floor of $5 imposed
on this market would:
A)
result in a surplus of the good.
B)
have no immediate effect.
C)
increase production of this good.
D)
increase consumer spending on this good.
Page 41
160.
(Ref 10-26 Figure: Market I) Use Figure Ref 10-26: Market I. A price floor at $15
would result in deadweight loss of:
A)
$9.
B)
$10.
C)
$20.
D)
$40.50.
Use the following to answer question 161:
161.
(Ref 10-27 Figure: Price Controls) Use Figure 10-27: Price Controls. A price ceiling has
been imposed at price = 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.
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