362 Miller Economics Today, 16th Edition
32) Price ceilings often generate
A) market clearing prices.
B) rapid increases in supply to meet the excess demand.
C) equilibriums that utilize rationing by price.
D)
b
lack markets.
33) An example of a black market is
A) a retail market. B) a discount market.
C) scalping. D)
b
arter.
34) An effective price ceiling usually generates
A) fire sales as firms try to unload their excess inventories.
B) higher nominal prices.
C) the use of nonprice rationing devices.
D) happy sellers and dissatisfied buyers.
35) A market in which a price controlled good is sold at an illegally high price is known as
A) a flooring market. B) a ceiling market.
C) a black market. D) a supermarket.
36) Which of the following statements is most accurate regarding who benefits and loses from
establishment of a minimum wage above the market clearing wage?
A) Individuals who obtain jobs benefit because they earn a higher wage, but some individuals
lose because employers will not hire them at the minimum wage.
B) All workers benefit equally from the establishment of the minimum wage because just as
many workers as before remain employed, and all earn the higher minimum wage.
C) All employers benefit equally from the establishment of the minimum wage because they
are able to hire fewer workers at a lower wage.
D) All employers lose because they must pay the higher minimum wage to the same number
of employees as they did before the minimum wage was established.
37) A price floor set below the equilibrium price will cause which of the following?
A) an increase in demand B) a shortage
C) a surplus D) none of the above
38) If the government imposed a price ceiling on gasoline above this good s current market clearing
price, there would be
A) a shortage of gasoline. at the ceiling price.
B) a surplus of gasoline at the ceiling price.
C) an increase in the price of gasoline.
D) no change in the price of gasoline.
39) A price ceiling set below the market clearing price will tend to cause which of the following?
A) a surplus B) a shortage
C) an increase in demand D) a reduction in supply
40) A price ceiling set above the equilibrium price will cause which of the following?
A) an increase in supply B) a surplus
C) a shortage D) no effect on either the price or quantity
41) A price ceiling is
A) the lowest price a seller can charge without losing all of its customers.
B) a legal minimum price below which a good or service cannot be sold.
C) a legal price above which a good or service cannot be sold.
D) a nonprice rationing device.
42) Price controls
A) exist when firms decide that they want to charge a higher price for their product.
B) exist when consumers boycott a product.
C) are government mandated minimum or maximum prices that may be charged for goods.
D) are the benefit of discount stores like Sam s Club.
43) Nonprice rationing devices are required
A)
b
ecause the price system does not allocate resources efficiently.
B) when there are price floors but not when there are price ceilings.
C) so that prices will go back to equilibrium.
D) to allocate goods when there is a price ceiling.
44) All of the following are examples of nonprice rationing devices EXCEPT
A) price controls. B) queues. C)
b
lack markets. D) waiting lists.
45) In the 1970s, the government placed price ceilings on gasoline prices. A shortage of gasoline
occurred, and long lines formed at the pumps. Some gas stations required that in addition to
paying the price on the pump you had to buy a blank will. The action of having to purchase the
will in order to purchase gas is known as
A) a surplus. B) a price support.
C) the price system. D) a black market.
46) Price controls often generate
A) more efficient markets.
B)
b
lack markets.
C) rapid adjustment to market clearing prices.
D) greater price flexibility.
47) An example of a black market is
A) the market for high fashions. B) the hiring of undocumented workers.
C) a farmer s market. D) a discount market.
48) Suppose the market clearing price for gasoline is $4.75 per gallon. Now suppose that policy
makers pass a law requiring that the maximum price that can be charged is $3.75 per gallon.
Such a situation is an example of
A) a price control that will lead to a surplus of gasoline on the market.
B) a price floor that will lead to a shortage of gasoline on the market.
C) a price ceiling that will lead to a shortage of gasoline on the market.
D) a price floor that will lead to a surplus of gasoline on the market.
49) Suppose the market clearing price is $1.25 and the price ceiling is $1.50. The price that prevails
in the market will be
A) $1.50. B) $1.25.
C) less than $1.25. D) more than $1.50.
50) A price ceiling established below the market clearing price will usually cause
A) nonprice rationing. B) an excess supply.
C) no change in the market clearing price. D) a decrease in the market clearing price.
51) In the above figure, a shortage could be caused by a government price ceiling set at
A) $1.00. B) $2.00. C) $2.50. D) $3.00.
52) Refer to the above figure. A price control has been set which has led to a shortage. This means
that a
A) price ceiling has been set at P1. B) price floor has been set at P1.
C) price ceiling has been set at P2. D) price floor has been set at P2.
53) Refer to the above figure. A price control has been set which has led to a surplus. This means
that a
A) price ceiling has been set at P1. B) price floor has been set at P1.
C) price ceiling has been set at P2. D) price floor has been set at P2.
54) Refer to the above figure. If a price ceiling of $3 was set,
A) the quantity sold would be 80 units. B) there would be a surplus of 40 units.
C) there would be a shortage of 40 units. D) there would be a shortage of 20 units.
55) Refer to the above figure. If a price floor of $5 was set,
A) the quantity sold would be 80 units.
B) the quantity sold would be 60 units.
C) the quantity demanded would be 100 units.
D) there would be a shortage of 20 units.
56) Refer to the above figure. If a price floor of $5 was set,
A) the quantity sold would be 80 units. B) there would be a surplus of 40 units.
C) there would be a shortage of 40 units. D) there would be a shortage of 20 units.
57) Refer to the above figure. If a price floor of $3 was set,
A) the quantity sold would be 80 units. B) there would be a surplus of 40 units.
C) there would be a shortage of 40 units. D) there would be a shortage of 20 units.
58) Refer to the above figure. A price ceiling has been set at P1
,
and a black market has opened. The
equilibrium black market price will be
A)
b
elow P1B)
b
etween P1and P3
C) above P3D) P2
59) Refer to the above figure. A price ceiling has been set at P1
,
and a black market has opened. The
equilibrium black market quantity will be
A)
b
elow Q1B) above Q3
C)
b
etween Q1and Q3D) Q2
60) When are black markets likely to arise?
A) when the government removes a price floor
B) when the government enforces a price ceiling
C) when there is a surplus of a good
D) when the quantity supplied of a good exceeds the quantity demanded
61) Refer to the above figure. Suppose the government imposes a minimum wage rate of $20.00 per
hour. This will likely result in
A) a surplus of labor. B) a shortage of labor.
C) an equilibrium in the labor market. D) an increase in the demand for labor.
62) Which of the following is a price floor?
A) rent controls
B) minimum wage rates
C) a freeze on upward moving gasoline prices
D) college tuition caps
63) Government imposed price controls often lead to
A) illegal trades of the good.
B) the most efficient use of resources.
C) the equilibrium solution in terms of price and quantity.
D) maximization of profits.
64) A price ceiling represents
A) a maximum price that can be legally charged for a product or service.
B) a minimum price that can be legally charged for a good or service.
C) a lottery imposed upon producers by the government.
D) a first come, first served mechanism for controlling prices.
65) A price floor represents
A) a maximum price that can be legally charged for a product or service.
B) a minimum price that can be legally charged for a good or service.
C) a lottery imposed upon producers by the government.
D) a first come, first served mechanism for controlling prices.
66) An effective government imposed price ceiling will result
A) in a surplus on the market.
B) in a shortage on the market.
C) in additional revenue for the government.
D) in prices for the product falling in the future.
67) Suppose a price ceiling is set above the equilibrium price. Now suppose that policy makers
decide to raise the price ceiling. This increase in the price ceiling will cause which of the
following to occur?
A) The surplus in the market will increase.
B) The surplus in the market will decrease.
C) The shortage in the market will increase.
D) None of the above.
68) Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy
makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of
the following to occur?
A) The shortage in the market will decrease.
B) The shortage in the market will increase.
C) The surplus in the market will decrease.
D) The surplus in the market will increase.
69) When a government increases an effective price ceiling for a product
A) the shortage in the market will be reduced.
B) the shortage in the market will be increased.
C) the surplus in the market will be reduced.
D) the surplus in the market will increase.
70) When the government sets a price floor which is above the equilibrium price,
A) a surplus will develop.
B) a shortage will develop.
C) the equilibrium price will be maintained.
D) a price ceiling will follow.
71) A black market
A) can arise when government imposes a price ceiling below the market clearing price.
B) can arise when government imposes a price floor below the market clearing price.
C) was created when after hours trading was permitted on some stock exchanges.
D) is a market where products with outdated expiration dates are sold.
72) Refer to the above figure. If the government imposes a price floor of $60,
A) the quantity of goods that will be traded is 100.
B) the quantity of goods that will be traded is 200.
C) the quantity of goods that will be traded is 150.
D) the quantity of goods that will be traded is 0.
73) Refer to the above figure. If the government imposes a price ceiling of $20,
A) the quantity of goods that will be traded is 100.
B) the quantity of goods that will be traded is 200.
C) the quantity of goods that will be traded is 150.
D) the quantity of goods that will be traded is 0.
74) Refer to the above figure. A surplus occurs if the government imposes
A) a price floor at $60. B) a price floor at $20.
C) a price ceiling at $60. D) a price ceiling at $20.
75) Refer to the above figure. A shortage occurs if the government imposes
A) a price floor at $60. B) a price floor at $20.
C) a price ceiling at $60. D) a price ceiling at $20.
76) Refer to the above figure. If the government imposes a price ceiling of $60,
A) the quantity traded will be 150, and the price will be $40.
B) the quantity traded will be 100, and the price will be $60.
C) the quantity traded will be 200, and the price will be $60.
D) the quantity traded will be 150, and the price will be $60.
77) Refer to the above figure. If the government imposes a price floor of $20,
A) the quantity traded will be 150, and the price will be $20.
B) the quantity traded will be 100, and the price will be $20.
C) the quantity traded will be 200, and the price will be $20.
D) none of the above.
78) Refer to the above figure. A price floor of $60 results in
A) a shortage of 100 units. B) a shortage of 200 units.
C) a surplus of 100 units. D) a surplus of 200 units.
79) Refer to the above figure. A price ceiling of $20 results in
A) a shortage of 100 units. B) a shortage of 200 units.
C) a surplus of 100 units. D) a surplus of 200 units.
80) Price controls
A) do not include black markets.
B) are another name for the price system.
C) do not include rent controls.
D) interfere with the rationing function of prices.
81) Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in
New York. The game was sold out and some fans could not get tickets. This suggests that
A) selling price was below equilibrium price.
B) selling price was above equilibrium price.
C) selling price was at equilibrium.
D) the game was advertised too heavily.
82) Scalping at major sporting events is an example of
A) a surplus caused by the existence of price ceilings.
B) the operation of rationing by the market.
C) a black market caused by a price ceiling.
D) a black market caused by a price floor.
83) A black market may occur when
A) the government imposes a price floor below the market clearing price.
B) the government imposes a price ceiling below the market clearing price.
C) the government imposes a price ceiling above the market clearing price.
D) the government does not impose either a price ceiling or a price floor.
84) An effective price ceiling occurs when
A) the government sets a maximum price for a good above the equilibrium price.
B) the government sets a minimum price for a good above the equilibrium price.
C) the government sets a minimum price for a good below the equilibrium price.
D) the government sets a maximum price for a good below the equilibrium price.
85) Suppose that the current equilibrium price of gasoline is $5.50 per gallon and that the
government passes a law that requires the price to be no more than $5 per gallon. What will be
the effects?
86) In some developing countries and in some former Communist countries ,people exchange their
domestic currencies for foreign currencies such as the dollar in black markets. Why would this
practice go on?
Chapter 4 Extensions of Demand and Supply Analysis 377
4.5 The Policy of Controlling Rents
1) Instituting a rent control program will most likely lead to
A) a shortage of rental units.
B) overly elaborate and expensive construction.
C) an efficient allocation of existing units among consumers.
D) an excess quantity supplied of rental units.
2) Which of the following must occur as a result of ceilings on apartment rents that are set below
market clearing rental rates?
A) Property owners respond to the ceilings by increasing maintenance and repairs.
B) Property owners respond to the ceilings by constructing new apartment buildings.
C) There is a decrease in the quantity of apartments that prospective tenants wish to rent.
D) There is a decrease in the quantity of apartments that property owners offer for rent.
3) The objective of rent controls is to
A) ensure an adequate supply of rental housing for the poor.
B) keep rents below levels that would be observed in a freely competitive market.
C) encourage the construction of new rental units.
D) raise revenue for the local government.
4) Rent controls often have adverse effects, including
A) too much housing in a community.
B) deterioration in the quality of existing rental units.
C) too much construction of new rental units in the community.
D) income transfers from the poor to landlords.
5) In New York City, apartment rent can be adjusted only when a tenant leaves. This lead
A) people to change apartments often.
B) landlords to encourage tenants to stay in their apartments.
C) tenants to stay in apartments longer than they would otherwise.
D)
b
usinesses to build new rental units.
6) In the housing market, rents serve the purpose of
A) making landlords rich.
B) rationing the availability of existing housing.
C) providing an entry by the government into the housing market.
D) increasing tax collections by the community.
7) The textbook points out that rent controls have
A)
b
enefited upper income or existing tenants.
B) had no effect on the market for housing.
C) greatly benefited the homeless.
D) attracted increases in low income housing.
8) Who bears the costs of a program to control rents at a maximum level?
A) Landlords or owners of housing units
B) Consumers who face difficulty moving to a more suitable apartment
C) Homeless who cannot find rental units
D) All of these
9) The textbook suggests that rent controls
A) actually contribute to the housing boom in an area where they are applied.
B) actually contribute to the housing shortage in the area where they are applied.
C) are used in a government kickback scheme.
D) have no effect on the local housing market.
10) Of the following groups, who gains from rent controls?
A) Landlords
B) Construction workers and their union leaders
C) Poor people who have a hard time earning enough income to pay high rents
D) High income people who live in rent controlled apartments
11) Under rent controls,
A) apartments tend to be nicer than they would be under freely competitive markets.
B) landlord tenant relationships are more harmonious than under freely competitive
markets.
C) the quantity demanded of rental units is less than it would be under freely competitive
markets.
D) the number of rental units available for rent is lower than under freely competitive
markets.
12) The City Council of Happy Village is thinking about imposing rent controls. If they put rent
controls in place, which constituency are they trying to please?
A) Landlords B) All taxpayers
C) Existing tenants D) All voters
13) Rent controls are
A) when rents are set above the market clearing level to aid landlords.
B) used to provide incentives to contractors to build new apartments.
C) used to generate revenue for the local government.
D) when rents are set below the market clearing level.
14) When rent controls establish a legal maximum rental rate below the equilibrium rental rate,
A) quantity demanded exceeds quantity supplied.
B) quantity supplied exceeds quantity demanded.
C) demand exceeds supply.
D) supply exceeds demand.
15) Who is most likely to benefit from rent controls?
A) Consumers who are able to obtain apartments at the controlled rents
B) Consumers who are unable to obtain apartments at the controlled rents
C) Landowners who can lease the apartments at the controlled rents
D) The government that controls the rents
16) Rent controls are an example of a
A) price floor.
B) price ceiling.
C) price floor for the consumer and a price ceiling for the producer.
D) nonprice rationing device.
17) An effective rent control will
A) lead to a surplus of housing units.
B) keep rents below the competitive market level.
C) keep rents above the competitive market level.
D)
b
e set at the price where quantity supplied equals quantity demanded.
18) Which of the following is one of the functions of rental prices?
A) To redistribute income from landlords to renters
B) To redistribute income from renters to landlords
C) To signal to the local government when taxes on rental units should be increased
D) To ration the use of existing housing for current consumers
19) Which of the following is an example of a price ceiling?
A) The minimum wage B) Agricultural price supports
C) Rent controls D) None of the above is correct
20) Which of the following is NOT a function of rental prices?
A) To stimulate the construction of new housing
B) To ration the existing housing stock
C) To provide housing to individuals below market value
D) To allocate existing scarce housing among different people