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53. The number of unskilled workers employed before and after a change in the minimum wage is found to be the same.
This means
a.
the minimum wage change did not affect the unskilled labor market.
b.
nothing, unless we also know that the number of hours worked by each worker has not changed.
c.
the minimum wage could be below the equilibrium wage for unskilled labor.
d.
either b or c
e.
none of the above
Exhibit 4-6
54. Refer to Exhibit 4-6. At a wage of $7, there will be a __________ of unskilled workers equal to __________ thousand
workers.
a.
shortage; 10
b.
surplus; 20
c.
surplus; 10
d.
shortage; 20
e.
surplus; 15
55. Refer to Exhibit 4-6. Suppose the minimum wage is set at $7. The result will be
a.
a surplus of unskilled workers.
b.
a shortage of unskilled workers.
c.
no effect on the market for unskilled labor.
d.
none of the above
56. Refer to Exhibit 4-6. Suppose the minimum wage is set at $5. The result will be
a.
unemployment.
b.
a shortage of unskilled labor.
c.
no impact on the unskilled labor market.
d.
a prolonged surplus of unskilled labor.
e.
none of the above
Exhibit 4-7
57. Refer to Exhibit 4-7. The number of unskilled workers who want to work at the minimum wage is
a.
N3.
b.
N1.
c.
N2.
d.
N2 - N1.
58. Refer to Exhibit 4-7. How many fewer persons work in the unskilled labor market at the minimum wage (WM) than at
the equilibrium wage (W1)?
a.
(N2 - N1) persons
b.
(N1 - N3) persons
c.
(N2 - N3) persons
d.
N3 persons
e.
none of the above
59. Refer to Exhibit 4-7. How many unskilled workers do firms want to employ at the minimum wage?
a.
N2
b.
N1
c.
N3
d.
N1 + N3
60. A minimum wage law (that sets the minimum wage above the equilibrium wage) can be expected to
a.
clear the market for unskilled workers.
b.
increase the number of unskilled workers employed.
c.
increase the number of firms in those industries where the law is effective.
d.
reduce the number of unskilled workers employed and/or reduce the number of hours worked by unskilled
workers.
e.
all of the above
61. If the minimum wage is set above the equilibrium wage, then
a.
more people will work than at the equilibrium wage.
b.
the same number of people will work as at the equilibrium wage.
c.
fewer people will want to work than at the equilibrium wage.
d.
there will be fewer labor hours purchased by employers than at the equilibrium wage.
e.
none of the above
62. At the minimum wage (set above the equilibrium wage),
a.
all individuals who end up working are paid less than if they were paid the equilibrium wage.
b.
none of the workers will lose there jobs or find themselves working fewer hours.
c.
none of the individuals who end up working are paid more than if they were paid the equilibrium wage.
d.
there will be fewer people working (or fewer labor hours demanded) than at the equilibrium wage.
e.
none of the above
63. Someone says, "Even though the equilibrium wage rate is $8 an hour in the unskilled labor market, if we impose a
minimum wage of $10 an hour, no one currently working will lose his or her job." This person must believe that the
a.
demand curve for unskilled labor is vertical.
b.
demand curve for unskilled labor is downward-sloping.
c.
supply curve for unskilled labor is downward-sloping.
d.
supply curve for unskilled labor is horizontal.
e.
none of the above.
64. If goods are not rationed according to price, if follows that
a.
they won't get rationed at all.
b.
some non-price rationing device will be used to ration the goods.
c.
first-come-first-served will necessarily be the rationing device used in the market.
d.
there will be surpluses in the market.
e.
none of the above
65. The minimum wage is an example of a
a.
price door.
b.
price wall.
c.
price floor.
d.
price ceiling.
Exhibit 4-8
66. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What has happened to the producers’ surplus as a result of the imposition of the price floor?
a.
Producers’ surplus has risen by (area 2 + 3)
b.
Producers’ surplus has fallen by (area 4 + 5)
c.
Producers’ surplus has changed by (area 3 - area 5)
d.
Producers’ surplus has changed by (area 2 - area 5)
67. Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium, the consumers’ surplus will equal
a.
area 1 + 2 + 3
b.
area 1 + 2 + 4
c.
area 3 + 5
d.
area 1 + 2 + 3 + 4 + 5
e.
area 6
68. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What is the change in the total surplus at the price floor, compared to at the equilibrium price?
a.
There was a gain in total surplus equal to (area 1 + 2 + 3)
b.
There was a gain in total surplus equal to (area 1 + 2 + 3 + 4 + 5)
c.
There was a loss in total surplus equal to (area 4 + 5)
d.
There was a loss in total surplus equal to (area 4 + 5 + 6 )
69. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What is the size of the total surplus at PF?
a.
area 1 + 2 + 3
b.
area 1 + 2 + 3 + 4
c.
area 1 + 2 + 3 + 4 + 5
d.
area 1 + 2 + 3 + 4 + 5 + 6
70. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What has happened to the consumers’ surplus as a result of the imposition of the price floor?
a.
consumers’ surplus has gone down by (area 2 + 4)
b.
consumers’ surplus has risen by (area 2 + 4)
c.
consumers’ surplus has gone down by (area 3 - area 5)
d.
consumers’ surplus has risen by (area 2 + 3)
71. Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the total surplus will equal
a.
area 1 + 2 + 3 + 4 + 5
b.
area 1 + 2 + 3
c.
area 2 + 3 + 4 + 5
d.
area 4 + 5
72. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What is the size of the producers’ surplus at PF?
a.
area 2 + 3 + 4 + 5
b.
area 2 + 3
c.
area 4
d.
area 6
73. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What is the size of the consumers’ surplus at PF?
a.
area 5
b.
area 6
c.
area 1 + 2 + 4
d.
area 1
74. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?
a.
Q2 - Q1
b.
Q3 - Q2
c.
Q3 - Q1
d.
Q2
75. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This
price floor is set at PF. What is the quantity of wheat purchased at PF?
a.
Q1
b.
Q2
c.
Q3
d.
Q2 - Q1
76. Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the producers’ surplus will equal
a.
area 1 + 2 + 3
b.
area 1 + 2 + 4
c.
area 3 + 5
d.
area 1 + 2 + 3 + 4 + 5
e.
area 6
77. In the market for a given product, when a price floor is set above the equilibrium price the result will be
a.
more exchanges made in the market.
b.
an increase in the supply of the product.
c.
a decrease in the demand for the product.
d.
a deadweight loss.
78. Suppose that the price of peanut butter is $3 per pound and the price of almond butter is $5 per pound. If the price of
peanut butter rises to $3.60 and the price of almond butter rises to $5.50, then the absolute price of peanut butter has
_______________ and the relative price of peanut butter has _______________.
a.
risen; fallen
b.
fallen; risen
c.
risen; risen
d.
fallen; fallen
Exhibit 4-9
Price of Good X
Quantity
Demanded
Quantity
Supplied
$10
220
90
11
200
100
12
180
130
13
150
150
14
120
190
15
80
260
79. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $15. The number of units that
would be exchanged in this market would be
a.
150, since that is the equilibrium quantity and the price ceiling is above the equilibrium price.
b.
80, since that is the number of units demanded at the price ceiling.
c.
260, since that is the number of units supplied at the price ceiling.
d.
170, since that is the average of the quantity demanded and the quantity supplied at the price ceiling.
80. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $10. The number of units that
would be exchanged in this market would be
a.
150, since that is the equilibrium quantity and the price ceiling is below the equilibrium price.
b.
220, since that is the number of units demanded at the price ceiling (and the quantity demanded is greater than
the quantity supplied).
c.
90, since that is the number of units supplied at the price ceiling (and the quantity supplied is less than the
quantity demanded).
d.
155, since that is the average of the quantity demanded and the quantity supplied at the price ceiling.
81. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $10. _________ units would
be exchanged in a free market, and ____________ units would be exchanged with the price ceiling in effect.
a.
150; 220
b.
150; 70
c.
110; 180
d.
150; 90
82. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $11. How many fewer units
would be exchanged at the price ceiling than would be exchanged at the equilibrium price?
a.
50
b.
30
c.
40
d.
70
83. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $13. _________ units would
be exchanged at the equilibrium price and ____________ units would be exchanged with the price ceiling in effect.
a.
150; 220
b.
150; 150
c.
110; 180
d.
150; 90
84. Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises
to $3.90 and the price of margarine rises to $2.20, then the absolute price of butter has _______________ and the relative
price of butter has _______________.
a.
risen; fallen
b.
fallen; risen
c.
risen; risen
d.
fallen; fallen
85. Price serves as a
a.
rationing device.
b.
transmitter of information.
c.
means of determining who gets what of the available limited resources and goods.
d.
a and b
e.
all of the above
86. When the price of a good rises, the price is transmitting information indicating that the good has become relatively
a.
scarcer.
b.
less scarce.
c.
more plentiful in supply.
d.
b and c
87. Which of the following is false?
a.
When the U.S. government imposed price ceilings on gasoline, the result was a surplus of gasoline.
b.
When the U.S. government imposed price ceilings on gasoline, the result was a shortage of gasoline.
c.
If a price ceiling is imposed below the equilibrium price in a given market, the result is a shortage in that
market.
d.
First-come-first-served is a commonly used rationing device.
88. In order for a price floor to have an impact on a market it must be set above the equilibrium price.
a.
True
b.
False
89. If the minimum wage law sets a price floor that is below the equilibrium wage in the unskilled labor market, the
minimum wage will create a shortage of unskilled labor.
a.
True
b.
False
90. A deadweight loss is the loss to society of not producing the supply-and-demand determined level of output.
a.
True
b.
False
91. A price floor creates a situation in which one party wins and another party loses, and the gains for the winner are equal
to the losses for the loser.
a.
True
b.
False
92. It is possible for the absolute price of a good to rise at the same time that the good's relative price is falling.
a.
True
b.
False
93. There is currently a price ceiling in the market for transplanted kidneys, which has helped to create a shortage of
transplanted kidneys.
a.
True
b.
False
94. The minimum wage is a good example of a price floor.
a.
True
b.
False
95. Buyers always prefer lower prices to higher prices.
a.
True
b.
False
96. The absolute price of a good is the price of that good in terms of another good.
a.
True
b.
False
97. Price ceilings sometimes result in some buyers and sellers purchasing the good at prohibited prices.
a.
True
b.
False
98. The need for a rationing device results from scarcity.
a.
True
b.
False
99. A tax placed on a good can make that good relatively more expensive and its substitutes relatively less expensive.
a.
True
b.
False
100. In order for a price ceiling to have an impact on a market it must be set above the equilibrium price.
a.
True
b.
False
101. In 1973 and 1979, the U.S. federal government imposed price ceilings on gasoline which resulted in surpluses of
gasoline.
a.
True
b.
False
102. What condition is necessary for a price ceiling to have an impact on a market? Describe at least three of the effects
that a price ceiling can have on a market. Give a hypothetical numerical example to help support your answer.
103. Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled
labor hours" when evaluating the impact on the market for unskilled labor of an increase in minimum wage.
104. What condition is necessary for a price floor to have an impact on a market? Describe two effects that a price floor
can have on a market.
105. List and describe the two major jobs performed by price.
